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Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

On January 13, 2004, TeleCommunication Systems, Inc. (“TCS”) issued a press release announcing that it had consummated the purchase of the Enterprise Mobility Solutions business unit of Aether Systems, Inc. (“Aether EMS”). A copy of this press release is attached hereto as Exhibit 99 and incorporated by reference herein. Aether EMS brings to TCS the Aether Fusion platform, a substantial customer base, and applications for logistics, financial services and the mobile office.

Consideration for the acquisition was valued at approximately $20 million, consisting of $18 million in cash, $1 million in the form of a TCS note payable to Aether Systems, Inc. and 204,020 newly issued shares of TCS Class A common stock. Concurrent with the acquisition, TCS closed on $21 million of financing with two accredited institutional investors, which includes $15 million of 3% Subordinated Convertible Debentures with a balloon 5-year maturity, approximately 1.4 million newly issued shares of TCS Class A common stock and warrants to purchase 341,072 shares of TSC Class A common stock. The majority of the proceeds from this financing transaction was used to fund the purchase of Aether EMS.

(a) Financial Statements of Business Acquired. It is impractical to provide the required financial statements of Aether EMS at the time of filing of this Report. It is anticipated that such financial statements will be filed by amendment as soon as practicable but in no event later than March 15, 2004.

(b) Pro Forma Financial Information. It is impractical to provide the required financial information with respect to Aether EMS at the time of filing of this Report. It is anticipated that such financial information will be filed by amendment as soon as practicable but in no event later than March 15, 2004.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

This PURCHASE AGREEMENT (“Agreement”), is made and entered into as of December 18, 2003, by and among Aether Systems, Inc., a Delaware corporation (“Aether” or “Seller”), and TSYS Acquisition Corp., a Maryland corporation (“Buyer”), and wholly owned subsidiary of TeleCommunication Systems, Inc., a Maryland corporation (“Parent”). Buyer, Parent and Seller are referred to collectively herein as the “Parties” and each is individually, a “Party.”

WHEREAS, Seller is in the business of providing integrated wireless data solutions to large enterprises;

WHEREAS, Seller desires to sell, convey, transfer, assign and deliver to Buyer, and Buyer desires to acquire certain assets and to assume the Assumed Liabilities (as defined herein) from Seller, in each case relating exclusively to the Business (as defined herein), which the Parties agree will be achieved pursuant to (i) the purchase and sale of the Purchased Assets (as defined herein) and (ii) the assumption of the Assumed Liabilities (as defined herein), all on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, Seller is the legal and beneficial owner of all of the issued and outstanding equity interests of Aether European Holdings, B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of The Netherlands, registered at the Rotterdam Chamber of Commerce under number 24304779 and with its registered office at Blaak 16, 3011 TA Rotterdam, The Netherlands (“Aether European Holdings”), which in turn owns all of the issued and outstanding equity interests of those indirect subsidiaries of Aether engaged in the Business outside of the United States;

WHEREAS, Seller desires to sell, convey, transfer, assign and deliver to Buyer, and Buyer desires to purchase, all the issued and outstanding equity interests of Aether European Holdings; and

WHEREAS, Parent desires to cause and ensure the completion of the foregoing transactions and Seller requires Parent to be a party to this Agreement as a condition thereof.

NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements made herein, and upon the terms and subject to the conditions hereinafter set forth, the Parties hereto agree as follows:

Whenever used in this Agreement, the terms defined below shall have the indicated meanings:

“AAE Excluded Assets” shall have the meaning set forth in Section 6.1(h).

“AAE Purchased Assets” shall have the meaning set forth in Section 2.1.

“Accounts Payable” shall mean all accounts payable and accrued Liabilities constituting the obligation to make payments in respect of goods and/or services to the extent received or ordered or contracted for by Seller, the Acquired Aether Entities or any of their respective Affiliates on or prior to the Closing in connection with the Business, other than intercompany payables in respect of amounts owed to Seller or any Affiliate of Seller (other than the Acquired Aether Entities).

“Accounts Receivable” shall mean (i) all accounts receivable under agreements or Contracts for services or products provided by the Seller, the Acquired Aether Entities or any of their respective Affiliates in the Business and other rights to payment from customers of the Business and the full benefit of all security for such accounts or right to payment (other than as provided in Section 6.2(d)), (ii) all other accounts or notes receivable of Seller, any of its Affiliates, any Acquired Aether Entities or any of their respective Affiliates with respect to the Business and the full benefit of all security for such accounts or notes (other than as provided in Section 6.2(d)), (iii) costs and estimated earnings in excess of billings on uncompleted contracts with respect to the Business and (iv) any Claim, remedy or other right relating to any of the foregoing; provided that “Accounts Receivable” shall exclude intercompany receivables in respect of amounts owed by Seller or an Affiliate of Seller (other than the Acquired Aether Entities).

“Acquired Aether Entities” shall mean Aether European Holdings, Aether Europe B.V., Aether Group (Holdings) Limited, Aether IFX LLC, Aether Management Services Limited, Aether Systems AB, Aether Systems Benelux BV, Aether Systems Limited, Beyerholm & More ApS, IFX Infoforex Limited, Aether Systems SA, Aether Systems (UK) Limited, Aether Technology Limited, Nimbusbright Limited, and Sila Communications Scandinavia ApS. For the avoidance of doubt, in the event that Beyerholm & More ApS and/or Sila Communications Scandinavia ApS complete their respective solvent liquidations prior to Closing, both such entities shall cease to be considered Acquired Aether Entities.

“Adjustment Floor” shall have the meaning set forth in Section 3.2(d).

“Aether European Holdings” shall have the meaning set forth in the recitals.

“Affiliate” shall mean, with respect to any Person, any Person which directly or indirectly through stock ownership, other arrangements or otherwise either controls, or is controlled by or is under common control with, such Person.

“Ancillary Agreements” shall mean the Transition Services Agreement, the Trademark License Agreement, the Deal License Agreement, the Bill of Sale, the Assignment and Assumption Agreement, Form 8954 and such other documents contemplated and necessary to effectuate the transactions contemplated herein.

“Applicable Laws” shall mean all laws, statutes, rules, codes, constitutions, principles of common law, treaties, regulations, ordinances, Orders or other requirements of rules of law as may be in effect on or prior to the Closing Date of any Governmental Authority having jurisdiction or regulatory authority over the Purchased Assets, Purchased Shares, the AAE Purchased Assets, the Acquired Aether Entities or the Business.

“Assigned Contracts” shall mean all Contracts related exclusively to the Purchased Assets or the Business, including Material Contracts set forth on Schedule 4.12(a).

“Assignment and Assumption Agreement” shall mean the assignment and assumption agreement to be entered into between Seller and/or its Affiliates and Buyer substantially in the form of Exhibit D attached hereto.

“Assumed Liabilities” shall mean (i) all Liabilities of the Business set forth on the Closing Net Working Capital Statement, (ii) Liabilities included in the line item “deferred revenue” as set forth on the Closing Balance Sheet, (iii) all Liabilities incurred in connection with, arising from or relating to Buyer’s (or its Affiliates’, including the Acquired Aether Entities’) ownership, operation, or use of the Business, including all of the Purchased Assets and the AAE Purchased Assets, from and after the Closing; (iv) without limiting the scope of any other subclause of this definition, all Liabilities arising under or resulting from the Assigned Contract, but only to the extent such Liabilities involve the observance, payment, performance or discharge of (or failure to observe, pay, perform or discharge) obligations due and owing from and after the Closing, pursuant to the terms of such Assigned Contract; and (v) Liabilities arising under or relating to statutory rights under Applicable Law (such as notice requirements, seniority and similar rights) of Employees of the Acquired Aether Entities from and after the Closing and salary, bonus and benefit payments that have accrued but are not yet due and payable to Employees of the Acquired Aether Entities (including all Employees of the Acquired Aether Entities).

“Audited Financial Statements” shall mean the financial statements of the Business, audited in accordance with GAAP, at and for each of the years ended December 31, 2001, December 31, 2002, and December 31, 2003 and such other periods as may be required by the rules and regulations of the SEC to be included pursuant to Item 7 of the Current Report on Form 8-K to be filed by Parent in connection with the Closing.

“Bill of Sale” shall mean the bill of sale and assignment conveying, selling, transferring, and assigning the Purchased Assets to Buyer, substantially in the form of Exhibit E attached hereto.

“Books and Records” shall mean all books and records of Seller or any of its Affiliates, other than those which are a part of the Seller’s consolidated books and records, necessary for the operation of the Business as currently operated, and all books and records of the Acquired Aether Entities, in each case including cost and pricing information, financial and accounting records, sales and credit records, supplier lists and records, training materials, training records, maintenance and inspection reports, equipment lists, repair notes and archives, sales and marketing materials.

“Business” shall mean the business of Seller, any of its Affiliates, any Acquired Aether Entity or any of their respective Affiliates of providing integrated wireless data solutions to enterprises with product development emphasis on mobile office, finance and asset management, field service, sales force automation, distribution and delivery management, and mail and messaging access, which is conducted through a division known as Enterprise Mobility Solutions (which includes the Acquired Aether Entities).

“Business Day” shall mean any day on which commercial banks are open for business in Baltimore, Maryland.

“Buyer Disclosure Schedule” shall mean that certain schedule identified as such and delivered by Buyer to Seller pursuant to this Agreement, as set forth in Article V, as the same may be supplemented and updated from time to time pursuant to this Agreement, each of which is hereby incorporated and made a part of this Agreement for all purposes as if set forth in full herein.

“Buyer Indemnitees” shall mean Buyer, its Affiliates (including Parent) and their respective Representatives.

“Charter Documents” of any Person shall mean such Person’s articles of incorporation, by-laws, certificate of formation, articles of association, limited liability company agreement or equivalent governing or organizational documents.

“Claim” shall mean any action, cause of action, suit, claim or counterclaim or legal, administrative or arbitral proceeding or investigation, whether or not the defense thereof, or any Liability in respect thereof, is covered by insurance and whether under consumer laws, equity or statute, including employment protection legislation.

“Closing Balance Sheet” shall mean an audited balance sheet of the Business as of the Closing Date prepared by the Seller in accordance with GAAP and delivered pursuant to Section 3.2(d).

“Closing Date Accounts Receivable” shall have the meaning set forth in Section 6.3(j).

“Closing Net Working Capital” shall have the meaning set forth in Section 3.2(d).

“Closing Net Working Capital Statement” shall have the meaning set forth in Section 3.2(d).

“COBRA” shall mean the requirements of Part 6 of Subtitle B of Title I of ERISA and Code Section 4980B and any similar state law.

“Competing Transaction” shall have the meaning set forth in Section 6.1(e).

“Competition Laws” shall mean all Applicable Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade.

“Confidentiality Agreement” shall mean that certain Non-Disclosure Agreement, dated August 28, 2003, between Goldman, Sachs & Co., on behalf of Seller, and Parent.

“Contracts” shall mean all oral or written contracts, leases (including unexpired real property leases), subleases, customer accounts, promises, commitments, undertakings, guarantees, warranties, representations, grant of rights, licenses, permits, registrations, authorizations and agreements, and any and all Claims, rights of setoff or recoupment, causes of action, accounts receivable, contract rights, accounts and/or rights to reciprocal compensation arising under or in connection therewith.

“Copyright Assignment” shall mean the copyright assignment to be entered into between Seller and buyer substantially in the form of Exhibit J attached hereto.

“Credit Support Arrangements” shall have the meaning set forth in Section 6.2(c).

“Deal License Agreement” shall mean the deal license agreement to be entered into between Seller and Buyer substantially in the form of Exhibit B attached hereto.

“Domain Name Assignment” shall mean the domain name assignment to be entered into between Seller and Buyer substantially in the form of Exhibit M hereto.

“Due Diligence Period” shall have the meaning set forth in Section 6.1(a).

“Employee Benefit Plan” shall mean any material “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) and any other plan, program or arrangement maintained outside the United States that Seller or any Acquired Aether Entity maintains, contributes to or is required to contribute to, with respect to any employee of the Business or any director of any Acquired Aether Entity.

“Encumbrances” shall mean all security interests, liens, (including mechanics, warehousemen, laborers and landlords liens), Claims, charges, community property interests, conditions, equitable interests, right-of-ways, easements, encroachments, preemptive rights, rights of first refusal or similar restrictions or rights, options, judgments, title defects, pledges, charges, escrows, options, mortgages, hypothecations, prior assignments, title retention agreements, indentures, security agreements, leases, title exceptions or any other encumbrances of any kind and, in addition with respect to the Purchased Shares, but without limitation to the generality of the foregoing, all rights of first refusal or preemption, attachments, usufructs or depositary receipts or warrants issued in respect thereof.

“Environmental Laws” shall mean any and all Applicable Laws of any Governmental Authority relating to pollution, hazardous substances, hazardous wastes, petroleum or otherwise relating to protection of the environment, natural resources or human health, including, by way of example and not by way of limitation, the Clean Air Act, the Clean Water Act, the Resource Conservation Recovery Act (“RCRA”), CERCLA, the Toxic Substances Control Act (“TSCA”), and the Emergency Planning and Community Right-to-Know Act (“EPCRA”), all as currently amended.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Excluded Assets” shall mean (i) Tax Assets, (ii) Excluded Know-how, (iii) Excluded Software, (iv) cash, cash equivalents and marketable securities of Aether (other than the equity interests in the Acquired Aether Entities), (v) defenses and claims that Seller could assert against third parties in proportion to their relationship to any Excluded Assets or Excluded Liabilities, (vi) subject to the terms and conditions of the Trademark License Agreement, all Trademarks or other indicia of origin of Seller and its Affiliates in any of the following words, logos, stylized lettering, other designs and variants thereof: “AETHER,” or “AETHER SYSTEMS,” (vii) all books, documents, records and files prepared in connection with or relating in any way to the transactions contemplated by this Agreement, including bids received from other parties and analyses relating in any way to the Purchased Assets, the Assumed Liabilities and/or the Business, (viii) all rights of Seller and its Affiliates under or pursuant to this Agreement and the Ancillary Agreements and transactions contemplated hereby and thereby, (ix) the assets, properties and rights of Seller and its Affiliates not used exclusively in the Business as currently operated (provided, however, that if such assets, properties and rights are used in the Business, but not exclusively used, then such assets, properties and rights are to be subject to the terms of the Trademark License Agreement, the Deal License Agreement and/or the Transition Services Agreement), (x) the rights and obligations of Seller under any Contracts that are not Assigned Contracts, (xi) rights under or amounts payable from any insurance policies in proportion to their relationship to the Excluded Assets or Excluded Liabilities, and (xii) the amount of any collateral provided pursuant to a Credit Support Arrangement. For purposes of this Agreement, and not withstanding anything else in this Agreement to the contrary, “Excluded Assets” shall not

include the AAE Purchased Assets or the AAE Excluded Assets, which are treated separately under Section 2.1 and Section 6.1(h).

“Excluded Know-how” shall mean any and all product specifications, processes, methods, product designs, plans, trade secrets, ideas, concepts, manufacturing, engineering and other manuals and drawings, physical and analytical, safety, quality control, technical information, data, research records, all promotional literature, customer and supplier lists and similar data and information, and any and all other confidential or proprietary technical and business information owned or controlled by Seller and related to Seller’s or any of its or its Affiliates’ past or present products or businesses, other than such matters used exclusively with respect to the Business as currently operated, as well as any documentation evidencing any of the foregoing. For purposes of this Agreement, “Excluded Know-how” shall not include any items listed in the previous sentence of the Acquired Aether Entities, which are treated separately under Section 2.1 and Section 6.1(h).

“Excluded Liabilities” shall mean any and all Liabilities of Seller, any of its Affiliates, any Acquired Aether Entity or any of their respective Affiliates or otherwise in any way related to the Business, the Purchased Assets, the Purchased Shares, or the AAE Purchased Assets that are not Assumed Liabilities.

“Excluded Software” shall mean those Software Programs described in Schedule 1(a).

“Foreign Antitrust Administrator” shall mean any Governmental Authority administering any Foreign Antitrust Laws.

“Foreign Antitrust Laws” shall mean the Competition Laws of the European Union and any country other than the United States.

“GAAP” shall mean United States generally accepted accounting principles applied on a consistent basis in effect on the date hereof.

“Governmental Authority” shall mean any department, commission, board, bureau, agency, authority, legislature, court, tribunal or other instrumentality of any nature whatsoever of any government or quasi-governmental unit of the United States or any other country, jurisdiction, state, county, province, municipality or other political subdivision.

“HSR Act” shall mean the Hart-Scott-Rodino-Antitrust Improvements Act of 1976, as amended.

“Income Tax” shall mean any Tax based on or measured by reference to net income including any interest, penalty, or addition thereto, whether disputed or not.

“Indemnified Party” shall have the meaning set forth in Section 8.4(a).

“Indemnifying Party” shall have the meaning set forth in Section 8.4(a).

“Independent Accounting Firm” shall have the meaning set forth in Section 3.2(d).

“Initial Net Working Capital” shall have the meaning set forth in Section 3.2(d).

“Insurance Policies” shall have the meaning set forth in Section 4.34.

“Intellectual Property” shall mean all (i) Patents, (ii) Know-how, (iii) Trademarks, (iv) copyrights, copyright registrations and applications for registration, (v) Software Programs (other than Excluded Software) and (vi) all other intellectual property rights whether registered or not, in each case that are licensed to or owned by Seller and used exclusively in the Business as currently operated or which are licensed to or owned by an Acquired Aether Entity (other than any AAE Excluded Assets).

“Inventory” shall mean the consumable inventory of Seller or the Acquired Aether Entities, wherever located, including, without limitation, all finished goods, work in process, raw materials, spare parts and all other materials and supplies to be used or consumed exclusively by the Business.

“Know-how” shall mean any and all product specifications, processes, methods, product designs, plans, trade secrets, ideas, concepts, inventions, manufacturing, engineering and other manuals and drawings, physical and analytical, safety, quality control, technical information, data, research records, all promotional literature, customer and supplier lists and similar data and information, and any and all other confidential or proprietary technical and business information which are licensed to or owned by Seller and used exclusively in the Business as currently operated or which are licensed to or owned by an Acquired Aether Entity (other than any AAE Excluded Assets).

“Leased Real Property” shall mean (a) the real property in which Seller, pursuant to a Real Property Lease, holds a leasehold estate in, or is granted the right to use or occupy any land, buildings, structures, improvements, fixtures or other interests in real property used exclusively in the Business as currently operated and (b) the real property in which any Acquired Aether Entity, pursuant to a Real Property Lease, holds a leasehold estate in, or is granted the right to use or occupy any land, buildings, structures, improvements, fixtures or other interests in real property. Schedule 4.35 sets forth a complete and accurate list of all Leased Real Property.

“Liabilities” shall mean any and all direct or indirect indebtedness, liabilities, assessments, expenses, Claims, Losses, deficiencies, obligations or responsibilities, known or unknown, disputed or undisputed, joint or several, vested or unvested, executory or not, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, determinable or undeterminable, accrued or unaccrued, absolute or not, actual or potential, contingent or otherwise (including any Liability under any guarantees, letters of credit, performance credits or with respect to insurance loss accruals), whether due or to become due, and whether Claims with respect thereto are asserted, if at all, before or after the Closing).

“Losses” shall mean any and all losses, demands, Claims, allegations, assertions, Liabilities, costs, damages, judgments, obligations (including corrective or remedial obligations),

debts, settlements, assessments, deficiencies, Taxes, penalties, interest, fines or expenses, whether or not arising out of any Claims by or on behalf of a third party, including interest, penalties, reasonable attorney’s fees and expenses and all reasonable amounts paid in investigation, defense or settlement of any of the foregoing, but specifically excluding any consequential, special or punitive damages.

“Material Adverse Effect” shall mean any event, change, circumstance or effect that individually or in the aggregate (taking into account all other such events, changes, circumstances or effects), is, or is reasonably likely to (A) be materially adverse to the operations or financial condition of the Business, Assumed Liabilities, the Purchased Assets, the Purchased Shares or the AAE Purchased Assets taken as a whole, or (B) materially hinder or delay Seller’s ability to consummate the transactions contemplated herein, in either case, other than any event, change, circumstance or effect relating (i) to the United States economy in general, or the economy of any foreign country in general in which Seller or an Acquired Aether Entity conducts a material segment of the Business (provided that such do not affect the operations, financial condition or prospects of the Business, Liabilities, the Purchased Assets, the Purchased Shares or the AAE Purchased Assets in a materially disproportionate manner), (ii) in general to the industries in which the Business operates (provided that such do not affect the operations, financial condition or prospects of the Business, Liabilities, the Purchased Assets, the Purchased Shares or the AAE Purchased Assets in a materially disproportionate manner) and not specifically relating to the Business, (iii) financial, banking, or securities markets (including any disruption thereof and any decline in the price of any security or any market index), (iv) to the announcement of the Agreement or any transactions contemplated hereunder, the fulfillment of the Parties’ obligations hereunder or the consummation of the transactions contemplated by this Agreement or (v) to any outbreak or escalation of hostilities or act of terrorism involving the United States or any declaration of war by the U.S. Congress.

“Net Working Capital” shall be the amount equal to the remainder of (i) the sum of (a) Accounts Receivable (net of any reserves thereon), (b) Inventory (net of any reserves thereon), and (c) Prepaid Expenses, minus (ii) Accounts Payable (it being understood that Accounts Payable includes the line items “accrued expenses” and “accrued employee compensation and benefits”). In the case of all of the foregoing items, each shall be calculated in the same way and using the same methods, and reflecting the same line items as were used and reflected in preparing the statement of net working capital dated as of September 30, 2003, attached hereto as Exhibit H (the “September 30 Net Working Capital Statement”).

“Net Working Capital Certificate” shall have the meaning set forth in Section 3.2(c).

“Non-Competing Transaction” shall have the meaning set forth in Section 6.1(e).

“November 30 Net Working Capital” shall have the meaning set forth in Section 3.2(c).

“November 30 Net Working Capital Statement” shall have the meaning set forth in Section 3.2(c).

“Order” shall mean any order, judgment, preliminary or permanent injunction, temporary restraining order, award, citation, decree, consent decree or writ of any Governmental Authority.

“Patents” shall mean all patents, patent disclosures and patent applications (including, without limitation, all reissues, divisions, continuations, continuations-in-part, renewals, re-examinations and extensions of the foregoing) owned by Seller and used exclusively in the Business as currently operated or owned by an Acquired Aether Entity (other than any AAE Excluded Assets).

“Patent Assignment” shall mean the patent assignment to be entered into between Seller and Buyer in the form of Exhibit K attached hereto.

“Permits” shall mean all permits, licenses, approvals, registrations, qualifications, rights, variances, grants, permissive uses, easements, certificates, certifications, consents, and other authorizations of every nature whatsoever required by, or issued to or on behalf of Seller, any of its Affiliates, any Acquired Aether Entity or any of their respective Affiliates by any Governmental Authority that are necessary to the Business as currently operated or issued to or on behalf of an Acquired Aether Entity (other than any AAE Excluded Assets).

“Permitted Encumbrances” shall mean (i) any Encumbrances specifically disclosed in Schedule 4.8(a), (ii) liens for Taxes not yet due and payable, (iii) mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or other like liens arising or incurred in the ordinary course of the Business which are related to Assigned Contracts that are for an immaterial amount and equipment leases with third parties entered into in the ordinary course of the Business or other Encumbrances incurred by the Business; (iv) liens filed by the lessor of equipment leases with third parties entered into in the ordinary course of the Business which relate to Assigned Contracts that are for an immaterial amount, (v) licenses of Intellectual Property granted in the ordinary course of the operation of the Business and identified on Schedule 4.11, and (vi) with respect to the Leased Real Property: (a) easements, quasi-easements, licenses, covenants, rights-of-way, and other similar restrictions, agreements, conditions or restrictions, in each case, which are a matter of public record, (b) any conditions that would be shown by a current survey or physical inspection and (c) zoning, building and other similar restrictions pursuant to Applicable Laws.

“Person” shall mean an individual, a corporation, a limited or general partnership, a limited liability company, an association, a trust or other entity or organization, including a Governmental Authority.

“Personal Property” shall mean the equipment, furniture, machinery, computer hardware, motor vehicles and other tangible personal property owned or leased by Seller and

used exclusively in the Business as currently operated or owned or leased by any Acquired Aether Entity (other than any AAE Excluded Assets).

“Prepaid Expenses” as of any date shall mean payments made by Seller, any of its Affiliates, any Acquired Aether Entity or any of their respective Affiliates with respect to the Business, the Purchased Assets or the AAE Purchased Assets, which constitute prepaid expenses in accordance with GAAP.

“Private Financing” shall mean, collectively, the debt and equity financing transactions described in the term sheets attached to this Agreement as Exhibit I.

“Public Reports” means the Aether’s Exchange Act filings with the SEC since January 1, 2003.

“Purchase Price Objection Notice” shall have the meaning set forth in Section 3.2(d).

“Purchase Price Resolution Period” shall have the meaning set forth in Section 3.2(d).

“Purchased Assets” shall mean (i) the Leased Real Property, (ii) the Personal Property, (iii) the Permits, (iv) the Accounts Receivable, (v) the Intellectual Property, (vi) the Inventory, maintenance and operating supplies used exclusively in the Business as currently operated, (vii) the Books and Records, (viii) all Assigned Contracts, (ix) all data, records, files, manuals, blueprints and other documentation related exclusively to the Purchased Assets and the operation of the Business including service and warranty records, sales promotion materials, creative materials, art work, photographs, public relations and advertising material, studies, reports, correspondence and other similar documents and records used exclusively in the Business, whether in electronic form or otherwise, (ix) all client, customer and supplier lists, telephone numbers and electronic mail addresses with respect to past, present or prospective clients, customers and suppliers, (x) all catalogs and brochures relating exclusively to the Business, purchasing records and records relating to suppliers, (xi) copies of all personnel records of the Transferred Employees, (xii) all goodwill incident to the Business, (xiii) all Prepaid Expenses and security deposits relating exclusively to the Business (other than any collateral provided by Seller or its Affiliates (excluding the Aether Acquired Entities) in respect of Credit Support Arrangements, (xiv) all insurance policies and insurance benefits in proportion to their relationship to the Purchased Assets, the AAE Purchased Assets, the Purchased Shares, the Acquired Aether Entities or the Business, and (xv) all other intangible assets (including all Claims, contract rights and warranty and product Liability Claims against third parties) in proportion to their relationship to the Purchased Assets, the Purchased Shares, the AAE Purchased Assets or the Business. The Purchased Assets shall include the foregoing whether or not reflected on the Closing Balance Sheet, except for those assets which have been transferred or disposed of in the ordinary course of the Business after the date of September 30, 2003 and in accordance with this Agreement. For purposes of this Agreement, “Purchased Assets” shall not include the Purchased Shares or the AAE Purchased Assets, which are treated separately under Section 2.1, or the Excluded Assets or AAE Excluded Assets.

“Purchased Shares” shall mean all the issued and outstanding shares of Aether European Holdings comprising 182 Ordinary Shares of Euros 100 each.

“Real Property Leases” shall mean any and all written or oral lease agreements, sublease agreements, license agreements, occupancy agreements or other agreements or arrangements pursuant to which Seller or any Acquired Aether Entity (as the case may be) holds a leasehold estate in, or is granted the right to use or occupy, any Leased Real Property. Schedule 4.35 sets forth a complete and accurate list of all such Real Property Leases.

“Reimbursed Receivable” shall have the meaning set forth in Section 6.3(j).

“Representatives” shall mean a Person’s directors, officers, Affiliates, employees, attorneys, accountants, representatives, lenders, consultants, independent contractors, stockholders, members and other agents.

“Required Consents” shall have the meaning set forth in Section 6.3(b).

“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Seller Disclosure Schedule” shall mean that certain schedule identified as such and delivered by Seller to Buyer, pursuant to this Agreement, as set forth in Article IV, as the same may be supplemented and updated from time to time pursuant to this Agreement, each of which is hereby incorporated and made a part of this Agreement for all purposes as if set forth in full herein.

“Seller Indemnitees” shall mean Seller, its Affiliates and their respective Representatives.

“Seller’s Knowledge” shall mean the actual knowledge of a particular fact or other matter being possessed by David Oros, George Davis, David Reymann, Gregg Smith, Richard May, Douglas Stovall, Morton Nielson and Steve Davis after due inquiry.

“Seller New Matter” shall have the meaning set forth in Section 6.3(c).

“Seller Other Matter” shall have the meaning set forth in Section 6.3(c).

“September 30 Net Working Capital Statement” shall have the meaning set forth in the definition of “Net Working Capital.”

“Software Programs” shall have the meaning set forth in Section 4.11(b).

“Sublease” shall mean the sublease entered into by Seller and Buyer pursuant to which Buyer will sublease a portion of the U.S. Real Property to Seller after the Closing.

“Substitute Financing Notice” shall have the meaning set forth in Section 6.2(d).

“Straddle Period” shall mean any taxable year or period beginning before and ending after the Closing Date.

“Tax Assets” shall mean any refund, abatement or credit of, and all other assets comprising receivables or deferred assets or prepayments for, Taxes arising or resulting from the conduct of the Business or ownership of the Purchased Assets or Purchased Shares by the Seller, Acquired Aether Entities or any of their respective Affiliates for taxable periods or portions thereof ending on or before the Closing Date.

“Tax Indemnity Period” shall have the meaning set forth in Section 9.1(b).

“Tax Liabilities” shall mean all Liabilities for Taxes arising or resulting from the conduct of the Business or ownership of the Purchased Assets by the Seller, any Acquired Aether Entity or any of their respective Affiliates for taxable periods or portions thereof ending on or before the Closing Date.

“Tax Returns” shall mean all reports, returns, schedules and any other documents required to be filed with respect to Taxes and all claims for refunds of Taxes.

“Taxes” (and with correlative meanings, “Tax” and “Taxable”) shall mean all taxes of any kind imposed by a Governmental Authority, including those on, or measured by or referred to as income, gross receipts, financial operation, sales, use, ad valorem, value added, franchise, profits, license, withholding, payroll (including all contributions or premiums pursuant to industry or governmental social security laws or pursuant to other tax laws and regulations), employment, excise, severance, stamp, occupation, premium, property, recordation, transfer or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by such Governmental Authority with respect to such amounts.

“Trademarks” shall mean (i) trademarks, service marks, trade names, trade dress, labels, logos and all other names and slogans used exclusively with any products or embodying associated goodwill of the Business related to such products, whether or not registered, and any applications or registrations therefor, and (ii) any associated goodwill incident thereto, in each case owned by or licensed to Seller and used in the Business as currently operated or owned by or licensed to an Acquired Aether Entity (other than any AAE Excluded Assets).

“Trademark Assignment” shall mean the trademark assignment to be entered into between Seller and Buyer substantially in the form of Exhibit L attached hereto.

“Trademark License Agreement” shall mean the trademark license agreement to be entered into between Seller and Buyer substantially in the form of Exhibit A.

“Transferred Employees” shall have the meaning set forth in Section 6.2(c).

“Transition Services Agreement” shall mean the transition services agreement to be entered into between Seller and Buyer substantially in the form of Exhibit C attached hereto.

“UK Lease” shall mean the lease dated January 16, 1999, between Collin Estates Limited and Nimbusbright Limited.

“UK Real Property” shall mean the leasehold land and premises demised by the UK Lease.

“Unsolicited Proposal” shall have the meaning set forth in Section 6.1(e).

“USA Patriot Act” shall have the meaning set forth in Section 4.28(b).

“U.S. Lease” shall mean the Lease Agreement between Owings Mills Commerce Centre Limited Partnership and Aether (formerly, Aether Technologies International LLC) dated December 24, 1998, as amended from time to time, for the real property located at Suites 100, 106, 108, 110, 112, 114A, 118 and 120 of 11460 Cronridge Drive, Owings Mills, MD 21117.

“U.S. Real Property” shall mean the leasehold land and premises leased pursuant to the US Lease.

“Voting Securities” shall have the meaning set forth in Section 6.1(g).

ARTICLE II
PURCHASE AND SALE OF PURCHASED SHARES AND PURCHASED ASSETS AND
ASSUMPTION OF LIABILITIES

Section 2.1 Purchase and Sale of Purchased Shares. Subject to the terms and conditions of this Agreement, Seller shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall purchase from Seller and accept from Seller, full legal and economic title to the Purchased Shares, free and clear of all Encumbrances other than any restrictions on the transferability following the Closing of the Purchased Shares imposed by Applicable Laws. The parties further agree that (a) prior to or as of Closing, as contemplated by Section 6.1(h), the Aether Acquired Entities shall cease to own the AAE Excluded Assets (with the term “AAE Purchased Assets” meaning, for purposes of this Agreement, all assets, properties and rights of the Acquired Aether Entities other than the AAE Excluded Assets), and (b) Seller, pursuant to the terms of this Agreement, shall remain responsible for, and shall indemnify the Buyer Indemnitees (including Buyer and the Acquired Aether Entities) from and against, the Liabilities of the Acquired Aether Entities that are not Assumed Liabilities.

(a) Subject to the terms and conditions of this Agreement, Seller shall sell, assign, convey, transfer and deliver (or cause to be sold, assigned, conveyed, transferred and delivered) to Buyer as of the Closing Date, and Buyer shall purchase and take assignment and

delivery from Seller as of the Closing Date, all of Seller’s right, title and interest in and to the Purchased Assets, free and clear of all Encumbrances other than the Permitted Encumbrances.

(b) The Purchased Assets shall not include the Excluded Assets or any assets, properties or rights of the Acquired Aether Entities.

(a) Subject to the terms and conditions of this Agreement, Buyer will assume as of the Closing Date and subsequently, in due course, pay, honor and discharge in accordance with their respective terms and conditions all of the Assumed Liabilities without any right of set-off against Seller.

Section 3.1 Closing. Subject to the Parties’ satisfaction or waiver of the conditions precedent set forth in Article VII, the closing and consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place on January 9, 2004 at 10:00 a.m., Eastern Time, at the offices of Kirkland & Ellis LLP at 655 15th Street, NW, Suite 1200, Washington, DC 20005 and at such other places as the Parties may agree, or, if the conditions set forth in Article VII have not been satisfied or waived as of such date, on such later date that is mutually agreed between Seller and Buyer (such date being the “Closing Date”).

(a) Subject to the terms and conditions set forth in this Agreement, in addition to the assumption by Buyer of the Assumed Liabilities, Buyer and Parent agree to pay at Closing to Seller in consideration for the Purchased Shares and the Purchased Assets an aggregate purchase price equal to $19,000,000 (as adjusted based on the Closing Net Working Capital Statement pursuant to Section 3.2(d), the “Purchase Price”), which shall be paid in cash, in immediately available funds by wire transfer to an account designated by Seller by written notice to Parent at least two Business Days prior to the Closing Date (the “Consideration”).

(b) (i) If Parent has complied with its obligations in Section 6.3(e) and has properly delivered to Seller the Substitute Financing Notice, Parent shall not be required thereafter to pay the Purchase Price in cash, and the Purchase price shall be payable as contemplated by this Section 3.2(b) (but only to the extent Seller agrees to accept the Substitute Financing). Simultaneously with delivery to Seller of the Substitute Financing Notice, Parent shall offer to Seller the option to accept as the Purchase Price, in lieu of cash consideration, the securities contemplated by the Private Financing (on the terms set forth in Exhibit I, or on terms that were more favorable to the provider of the Private Financing to the extent they were set forth in any Completed Financing Agreements), pro rated to reflect the difference between (A) the aggregate amount of the Private Financing and (B) the Purchase Price (the “Substitute Financing”). Parent shall hold such offer open, and such offer shall be irrevocable, for a period of thirty (30) days. Seller shall be entitled (but not obligated) to accept such offer by notifying

Parent of its acceptance at any time within such 30-day period, with such acceptance being conditioned upon the negotiation of definitive agreements that are acceptable in form and substance to Seller (and not inconsistent with the terms of Exhibit I) and Seller’s completion of, and satisfaction in all respects with, its due diligence investigation of the Buyer. Parent shall thereafter use its reasonable best efforts to negotiate with Seller and execute, as promptly as practicable, definitive agreements for the Substitute Financing; provided, that to the extent that Parent had previously entered into any definitive agreements for the Private Financing (the “Completed Financing Agreements”) but was for any reason unable to complete the Private Financing, Parent shall, if requested by Seller (at Seller’s sole and absolute discretion), enter into definitive agreements with Seller for the Substitute Financing having the same substantive terms as those contained in the Completed Financing Agreements. To facilitate the process of negotiating definitive documents, Parent shall promptly make available to Seller, after Seller notifies Parent of its interest in proceeding with the Substitute Financing, all Completed Financing Agreements or, if none, the most recent drafts of all definitive documents that Parent had been negotiating in connection with the Private Financing.

(ii) Parent shall reimburse Seller at the Closing for its reasonable attorneys’ fees and expenses incurred in the negotiation and preparation of definitive agreements for the Substitute Financing.

(iii) If Seller agrees to accept the Substitute Financing in lieu of cash consideration for the Purchase Price, then notwithstanding any other provision of this Agreement to the contrary, if Seller should become required to pay any amount to Parent pursuant to Section 3.2(d) in connection with the determination of Closing Net Working Capital, such amount shall be payable, at the sole option of Seller, in securities received in the Substitute Financing, rather than in cash, with such securities being valued on the basis they are valued in the definitive agreements for the Substitute Financing.

(c) Prior to the Closing Date, the Seller shall (i) prepare and deliver to Parent a statement (the “November 30 Net Working Capital Statement”) setting forth Net Working Capital (including the components thereof) as of November 30, 2003 (the “November 30 Closing Net Working Capital”), and (ii) provide Parent with a certificate of its Chief Financial Officer stating that the November 30 Net Working Capital Statement was prepared by Seller in good faith and in a manner consistent with Seller’s past practices, is consistent with the Books and Records and presents fairly the balance sheet items of the Business reflected thereon as of the date thereof in accordance with this Agreement (the “Net Working Capital Certificate”).

(d) As soon as practicable (and in any event within forty (40) days following the Closing), Seller shall prepare and deliver to Parent and its counsel the Audited Financial Statements, the Closing Balance Sheet, a statement (the “Closing Net Working Capital Statement”) setting forth Net Working Capital as of the close of business on the Closing Date (the “Closing Net Working Capital”) based on the Closing Balance Sheet, and all work papers and back-up materials relating thereto. The costs and expenses of preparing the Closing Balance Sheet and the Audited Financial Statements shall be borne 50% by Seller and 50% by Parent. Each of Parent and Buyer shall assist Seller and its Representatives in the preparation of the Closing Balance Sheet and shall provide Seller and its Representatives access at all reasonable times to the personnel, properties, Books and Records of the Business, including the Acquired

Aether Entities, for such purpose. No changes shall be made in any reserve or other account existing as of the date of the Closing Balance Sheet except as (i) a result of events occurring after the date of the Closing Balance Sheet and, in such event, only in a manner consistent with past practices and (ii) as required by GAAP. The Closing Balance Sheet and the Closing Net Working Capital Statement shall be conclusive and binding on the parties hereto unless Parent gives written notice of any objections thereto setting forth in reasonable detail the amounts in dispute and the basis for such disagreement (a “Purchase Price Objection Notice”) to Seller within thirty (30) days after its receipt of the Audited Financial Statements, Closing Balance Sheet, Closing Net Working Capital Statement and all work papers and back-up materials relating thereto. If Parent delivers a Purchase Price Objection Notice as provided above, the parties shall attempt in good faith to resolve such dispute, and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties. If the parties are unable to resolve, despite good faith negotiations, all disputes reflected in the Purchase Price Objection Notice within thirty (30) days thereafter (the “Purchase Price Resolution Period”), then the parties will, within thirty (30) days after the expiration of the Purchase Price Resolution Period, submit any such unresolved dispute to an independent accounting firm mutually acceptable to Parent and Seller (the “Independent Accounting Firm”). Parent and Seller shall provide to the independent accounting firm all work papers and back-up materials relating to the unresolved disputes requested by the Independent Accounting Firm to the extent available to Parent or its Representatives or Seller or its Representatives. Parent and Seller shall be afforded the opportunity to present to the Independent Accounting Firm any material related to the unresolved disputes and to discuss the issues with the Independent Accounting Firm. The determination by the Independent Accounting Firm, as set forth in a notice to be delivered to Parent and Seller within thirty (30) days after the submission of the unresolved disputes to the Independent Accounting Firm, shall be final, binding and conclusive on the parties. The fees and expenses of the Independent Accounting Firm shall be borne by Parent and Seller in inverse proportion as they may prevail on matters resolved by the Independent Accounting Firm, which proportionate allocations shall also be determined by the Independent Accounting Firm at the time the determination of the Independent Accounting Firm is rendered on the merits of the matters submitted. The Closing Net Working Capital reflected in the Closing Net Working Capital Statement, as revised to reflect the resolution of any and all disputes by the parties and/or the Independent Accounting Firm, shall be deemed to be the Closing Net Working Capital. The “Adjustment Amount” (which may be a positive or negative number) shall equal the amount determined by subtracting $3,750,020 (the “Initial Net Working Capital”) from the Closing Net Working Capital. Subject to the last sentence of this Section 3.2(d), if the Adjustment Amount is positive, the Adjustment Amount shall be paid by Parent via wire transfer of immediately available funds to the bank account designated by Seller. If the Adjustment Amount is negative, the Adjustment Amount shall be paid by Seller via wire transfer of immediately available funds to the bank account designated by Parent. All payments shall be made together with interest at the rate of 6% per annum, which interest shall begin accruing on the Closing Date and end on the date that the payment is made. Within five Business Days after the calculation of the Closing Net Working Capital becomes binding and conclusive on the parties, Seller or Parent, as the case may be, shall make the wire transfer payment provided for in this Section 3.2(d). Notwithstanding the foregoing, neither the Seller nor the Parent, as the case may be, shall have any liability to pay any Adjustment Amount to the other unless the aggregate Adjustment Amount due by the Seller or the Parent, as the case may be, exceeds $750,000 (the “Adjustment Floor”).

(e) Parent and Buyer agree that Seller is providing the Audited Financial Statements and the Closing Balance Sheet solely for the purpose of enabling Parent to comply with its public reporting obligations under applicable securities laws and not as an independent basis on which Parent or Buyer made the decision to complete the transactions contemplated by this Agreement. The Parties agree that differences between the Audited Financial Statements and the financial information covered by Section 4.17(a) shall not entitle Buyer or Parent to make a claim for any breach of the representations and warranties in such Section 4.17(a).

Section 3.4 Deliveries by Buyer. At the Closing, Buyer and Parent shall deliver, or cause to be delivered, to Seller the following:

(d) The Trademark License Agreement, the Transition Services Agreement, the Sublease, the Deal License Agreement, the Patent Assignment, the Trademark Assignment, the Copyright Assignment, the Domain Name Assignment, and the Assignment and Assumption Agreement, each duly executed by Buyer and Parent, as applicable; and

(e) such other deeds, bills of sale, endorsements, assignments, affidavits and other instruments of sale, assignment, conveyance and transfer, in form and substance reasonably satisfactory to Buyer and Seller, as are required to effectively vest in Buyer all of Seller’s right, title and interest in and to all of the Purchased Assets, the Purchased Shares and the AAE Purchased Assets, in each case free and clear of any and all Encumbrances, except for the Permitted Encumbrances.

Section 3.5 Deliveries by Seller. At the Closing, Seller shall deliver, or cause to be delivered by its Affiliates, to Buyer the following:

(a) a duly executed notarial deed of transfer in respect of the Purchased Shares in the form attached as Exhibit G and an extract from Aether European Holdings’ Shareholders Register, duly certified by a director of that company, recording the transfer of the Purchased Shares from Buyer to Seller;

(b) the certificate by officers of Seller required to be delivered pursuant to Section 7.3(c);

(c) the Trademark License Agreement, the Transition Services Agreement, the Deal License Agreement, the Patent Assignment, the Trademark Assignment, the Copyright Assignment, the Domain Name Assignment, the Sublease, the Assignment and Assumption Agreement and Bill of Sale and any other Ancillary Agreements, each duly executed by Seller;

(d) such other deeds, bills of sale, endorsements, assignments, affidavits and other instruments of sale, assignment, conveyance and transfer, in form and substance reasonably satisfactory to Buyer and Seller, as are required to effectively vest in Buyer all of Seller’s right, title and interest in and to all of the Purchased Assets, the Purchased Shares, in each case free and clear of any and all Encumbrances, except for the Permitted Encumbrances;

(f) True, correct and complete copies of all required consents of Governmental Authorities set forth on Schedule 4.6, and all Required Consents;

(g) Certificates of good standing from the Secretary of the State of Delaware, dated as of a recent date, certifying that Seller is in good standing in the State of Delaware;

(h) Certified copies of extracts of the trade register of the Acquired Aether Entities, where applicable, dated as of the Closing;

(i) Valid and effective assignment documentation, in form and substance reasonably acceptable to Buyer, of any rights to the Intellectual Property that are included in the Purchased Assets and the AAE Purchased Assets;

(j) Such documents as are required under Applicable Law to effect the resignation of Dave Reymann as a director of the Acquired Aether Entities;

(k) Such other documents and instruments as may be reasonably requested by Buyer to consummate the transactions contemplated herein and to carry out the obligations of the parties hereunder; and

Section 3.6 Tax Allocations. The Parties agree to allocate the Purchase Price (and all other capitalization costs) among the Purchased Assets and the Purchased Shares for all purposes (including financial, accounting and Tax purposes) in accordance with the allocation schedule attached hereto as Exhibit F (such exhibit and the allocations it contains, the “Allocation”). Buyer and Seller shall report and file all Tax Returns (including amended Tax Returns and claims for refund) consistent with the Allocation and shall not voluntarily take a position contrary thereto or inconsistent therewith (including, without limitation, in any audits or examinations by any Governmental Authority or any other proceedings). Each of Parent, Buyer and Seller shall cooperate in the filing of any forms (including “Form 8594” under Section 1060 of the Code) with respect to such Allocation, including any amendments to such forms required with respect to such Allocation.

Section 3.7 Transfer Taxes. All stamp, transfer, documentary, sales and use, registration and other similar taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the transactions contemplated hereby (collectively, the “Transfer Taxes”) shall be paid by Buyer, and except to the extent required to be filed by Seller, Buyer shall properly file on a timely basis all necessary Tax Returns and other documentation with respect to all Transfer Taxes. Buyer hereby agrees to indemnify Seller against, and hold

Seller harmless from, any and all Transfer Taxes. The provisions of this Section 3.7 and no other provision, shall govern the economic burden of Transfer Taxes.

The Seller represents and warrants to the Buyer as follows, except as set forth on the Seller’s Disclosure Schedule (which is arranged in sections corresponding to the Sections contained in this Article IV and as to which the disclosure in any section of the Seller Disclosure Schedule qualifies only the corresponding Section, unless it is reasonably apparent that the disclosure in any section or subsection of the Seller Disclosure Schedule should apply to one or more other Sections):

Section 4.1 Organization and Good Standing. Each of Seller and the Acquired Aether Entities is duly organized, validly existing and in good standing (to the extent such a concept exists in the relevant jurisdiction) under the laws of its jurisdiction of incorporation or organization and has all requisite power and authority to own, lease and operate its properties and assets and to operate the Business as currently operated. Except as set forth on Schedule 4.1, each of Seller and the Acquired Aether Entities is duly qualified or licensed in each jurisdiction in which the ownership of property or its assets or the conduct of its business requires such qualification or license, except where the failure to do so would not, individually or in the aggregate, have a Material Adverse Effect.

Section 4.2 Corporate Authorization. Except as set forth on Schedule 4.2, Seller has all necessary power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations under this Agreement and the Ancillary Agreements to which it is party, and to consummate the transactions contemplated hereby and thereby on the terms set forth herein and therein. No other corporate proceedings on the part of the Seller or the Acquired Aether Entities not previously taken as of the date hereof are necessary to authorize this Agreement, the Ancillary Agreements or the transactions contemplated herein or therein. Each of this Agreement and the Ancillary Agreements has been duly executed and delivered by Seller and, assuming the due execution of such agreement by Buyer, is a valid and binding obligation of Seller, enforceable against Seller, its property and assets, as case may be, in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, receivership and similar laws affecting the enforcement of creditors’ rights generally, and general equitable principles.

Section 4.3 Charter Documents. The copies of Seller’s and each of the Acquired Aether Entities’ Charter Documents previously provided to Buyer by Seller are true, complete and correct copies thereof. Such Charter Documents are in full force and effect. Except as set forth on Schedule 4.3, neither Seller nor any of the Acquired Aether Entities is in violation of any of the provisions of its Charter Documents.

Section 4.4 Sufficiency of Assets. Except as set forth on Schedule 4.4, the Purchased Assets and the AAE Purchased Assets, constitute all of the assets (tangible and intangible), Contracts, Permits, property (real and personal) and other items of any nature whatsoever used exclusively in the Business. Except as set forth on Schedule 4.4, and subject to the limitations

imposed by the terms of the Trademark License Agreement, the Deal License Agreement, the Purchased Assets and the AAE Purchased Assets, together with the licenses granted pursuant to the Trademark License Agreement and the Deal License Agreement, convey ownership or provide use or benefit of, as applicable, all of the assets (tangible and intangible), Contracts, Permits, and property (real and personal) used in the Business, other than the Excluded Assets. None of the Acquired Aether Entities owns in fee any real property.

Section 4.5 Condition of Assets; Inventory. Except as set forth on Schedule 4.5, to the Seller’s Knowledge, all of the Purchased Assets and the AAE Purchased Assets, whether owned or leased, are in good operating condition and repair (with the exception of normal wear and tear), and are free from defects other than minor defects as do not interfere with the present use thereof in the conduct of normal operations. The Inventory does not include items that are obsolete, damaged or slow moving, for which reserves have not been established in accordance with GAAP, as reflected on the September 30 Net Working Capital Statement. The Inventory is in good and merchantable condition, is suitable and usable for the purposes for which it is intended and is in a condition such that it can be sold in the ordinary course of the Business consistent with past practice. The Inventory is valued on the Books and Records at the lesser of cost or fair market value net of reserves recorded in accordance with GAAP.

Section 4.6 Consents. Except as set forth on Schedule 4.6, no consent, approval of or by, or filing with or notice to any Governmental Authority is required by Seller or any Acquired Aether Entity or with respect to Seller or any Acquired Aether Entity in connection with the execution, delivery or performance of this Agreement and the Ancillary Agreements or the consummation of the transactions contemplated hereby and thereby.

Section 4.7 No Conflict. Except as set forth on Schedule 4.7, the execution, delivery and performance by Seller of this Agreement and the Ancillary Agreements, and the consummation by Seller of the transactions contemplated hereby and thereby, do not and will not (a) breach, contravene, conflict with or cause a default under (with or without the giving of notice or lapse of time) the Charter Documents of Seller or any Acquired Aether Entity, (b) breach, contravene, conflict with or cause a default under (with or without the giving of notice or lapse of time) any Contract to which the Seller or any of the Acquired Aether Entities is a party or by which any of them is bound or to which any of the Purchased Assets or the AAE Purchased Assets are subject, except where such breach, contravention, conflict or default is not, individually or in the aggregate, reasonably expected to have a Material Adverse Effect, (c) violate any Order or Applicable Laws to which the Business, the Purchased Assets, the AAE Purchased Assets, the Purchased Shares or any Acquired Aether Entity is subject or by which Seller, any Acquired Aether Entity or their properties may be bound, except where such violations, conflicts, breaches or defaults is not, individually or in the aggregate, reasonably expected to have a Material Adverse Effect or (d) result in the creation of an Encumbrance, other than Permitted Encumbrances, on any of the Purchased Assets, the AAE Purchased Assets, the Purchased Shares or the Business.

Section 4.8 Title to and Use of Property. Except as set forth on Schedule 4.8(a) and excluding the Excluded Assets, at the Closing, Seller will convey and Buyer will acquire good, valid and marketable title to, or a valid leasehold interest in, the Purchased Assets, free and clear of any and all Encumbrances (including any and all Claims that may arise by reason of the

execution, delivery or performance by Seller of this Agreement) other than Permitted Encumbrances. Except as set forth on Schedule 4.8(b), each of the Acquired Aether Entities has good, valid and marketable title to, or a valid leasehold interest in, the AAE Purchased Assets, free and clear of any and all Encumbrances (including any and all Claims that may arise by reason of the execution, delivery or performance by Seller of this Agreement) other than Permitted Encumbrances.

Section 4.9 Permits. Except as set forth on Schedule 4.9, each of Seller and the Acquired Aether Entities possesses all Permits necessary to conduct the Business as currently operated, including registrations, where appropriate that are required to be held under the UK Data Protection Act 1998, the absence of which has or is reasonably expected to have a Material Adverse Effect. No Permit has been suspended or cancelled nor is any such suspension or cancellation pending or, to Seller’s Knowledge, threatened. Except for Permits, the loss of which is not reasonably expected to have a Material Adverse Effect, none of the Permits will terminate by reason of this transaction. Neither Seller nor any of the Acquired Aether Entities is in conflict in any material respect with or in material default or violation of any Permits.

Section 4.10 Claims and Proceedings. Except as set forth on Schedule 4.10, there is no outstanding Order of any Governmental Authority against or involving (i) any of the Acquired Aether Entities, (ii) the Purchased Assets, (iii) AAE Purchased Assets, or (iv) the Business. Except as set forth on Schedule 4.10, there is no outstanding Order of any Governmental Authority against or involving Seller that could defeat, defer or negatively impact the consummation of the transactions contemplated by the Agreement. Except as set forth on Schedule 4.10, there is no Claim pending or, to Seller’s Knowledge, threatened against or involving any of the Acquired Aether Entities, the Purchased Assets, the AAE Purchased Assets or the Business. There are no Claims pending or, to Seller’s Knowledge, threatened that would give rise to any right of indemnification on the part of any director or officer of the Acquired Aether Entities, or the heirs, executors or administrators of such director or officer, against any Acquired Aether Entity.

(a) Schedule 4.11(a) contains a true and complete list of all patents (and applications therefore), as well as any registrations for (or applications for registration), any trademarks, servicemarks, copyrights or domain names included in the Intellectual Property and the current status of the same. Except as set forth on Schedule 4.11(a), all of the foregoing are and remain valid and subsisting, with all fees, payments and filings due as of the Closing Date duly made. All of the foregoing are, to Seller’s Knowledge, enforceable.

(b) Schedule 4.11(b) also includes a true and complete list of all of Seller’s and the Acquired Aether Entities’ computer software programs, products and services which are material to the uninterrupted or unimpeded operation of the Business, included in the Intellectual Property, other than so called “off-the-shelf” shrink-wrap computer software programs (the “Software Programs”), other than Excluded Software. Tibco owns no rights in any interface between its software and Mobiquote.

(c) Seller has used commercially reasonable efforts, consistent with the operation of the Business, to maintain the source code and system documentation relating to the Software Programs (other than those Software Programs licensed from a third party) as confidential information. Schedule 4.11(c) identifies all Contracts pursuant to which source code to the Software Programs owned by Seller has been escrowed with any third party for the benefit of customers of Seller in connection with the Business.

(d) Except as set forth on Schedule 4.11(d), no open source or public library software, including any version of any software licensed pursuant to any GNU public license, was incorporated into any of Seller’s products or services.

(e) The Intellectual Property consists solely of items and rights which are: (i) owned by Seller or the Acquired Aether Entity; or (ii) used by Seller or an Acquired Aether Entity pursuant to a valid license, sublicense, consent or other similar written Contract. Each such Contract, other than Contracts for “off-the-shelf” software programs, are set forth on Schedule 4.11(e).

(f) Neither Seller nor any Acquired Aether Entity has knowingly infringed upon or misappropriated any intellectual property rights of any other Person anywhere in the world. Except as set forth on Schedule 4.11(f), no Claims: (i) challenging the validity, enforceability, effectiveness or ownership by Seller or an Acquired Aether Entity of any of the Intellectual Property; or (ii) to the effect that the use, distribution, licensing, sublicensing, or sale of any product, service, work, technology or process in the conduct of the Business as presently conducted by Seller or an Acquired Aether Entity infringes on any intellectual property rights of any Person have been asserted or, to Seller’s Knowledge, are threatened by any Person, nor are there, to Seller’s Knowledge, any valid grounds for any bona fide claim of any such kind, including any Claims related to the Aether Mark (as such term is used in the Trademark License Agreement) or the Residual Seller IP (as such term is used in the Deal License Agreement). In the event of any Claim being made against Aether Systems (UK) Limited by Wordlink concerning software licensed to Aether Systems (UK) Limited by IST, IST will fully indemnify Aether Systems (UK) Limited against any Losses.

(g) Except as set forth on Schedule 4.11(g), all personnel (including Representatives), who participate in the conception and/or development of the Intellectual Property on behalf of Seller or an Acquired Aether Entity have executed nondisclosure Contracts and either: (i) are employees of Seller or one of its Affiliates, (ii) are parties to a “work-for-hire” and/or other arrangement or Contracts with Seller or its Affiliates providing for the assignment of intellectual property rights relating thereto, or (iii) are parties to appropriate instruments of assignment in favor of Seller or its Affiliates providing for the assignment of intellectual property rights related thereto.

(h) Except as set forth on Schedule 4.11(h), Seller or the Acquired Aether Entity own and possess the Intellectual Property free and clear of any and all Encumbrances other than Permitted Encumbrances.

(i) Except pursuant to Contracts set forth on Schedule 4.11(e), neither Seller nor any Acquired Aether Entity owes any royalties or other payments to third parties in respect

of the Intellectual Property, and any royalties or other payments that have accrued prior to the Closing have been paid.

(j) Schedule 4.11(j) lists all licenses to the Seller or Acquired Aether Entities for the use of any material data provided by Seller or the Acquired Aether Entities to customers of the Business (“Data”), and the Seller and the Acquired Aether Entities have complied with all requirements under any Contracts under which they license Data as to the terms on which they may on-license or supply that Data to customers.

(a) Schedule 4.12(a) sets forth a complete and accurate list of each of the following Assigned Contracts and any Contracts to which any Acquired Aether Entity is a party or by which any of their respective assets or properties are bound, in each case, that:

(ii) relates to the Personal Property and involves a remaining obligation in excess of $100,000;

(iii) relates to a distribution, reseller or similar arrangement and involves a remaining obligation or receipt in excess of $100,000;

(iv) relates to the purchase of goods or provision of services and involves a remaining obligation or receipt in excess of $100,000;

(v) relates to any fixed price consulting or service agreement or similar arrangement and involves a remaining obligation or receipt in excess of $100,000;

(vi) is a Contract under which Seller or an Acquired Aether Entity has borrowed any money from, or issued any note, bond, debenture or other evidence of indebtedness issued to any Person, that has an aggregate future liability in excess of $100,000;

(vii) grants or evidences an Encumbrance on any of the Purchased Assets or any of the properties or assets of an Acquired Aether Entity, other than a Permitted Encumbrance;

(viii) provides for any joint venture, partnership, strategic alliance, shareholders’ Contract, co-marketing, co-promotion, co-packaging, joint development or similar arrangement;

(ix) provides for the resolution or settlement of any actual or threatened action, suit, claim, proceeding or other dispute and involves an amount in controversy in excess of $100,000;

(x) relates to the ownership or transferability, or imposes any Encumbrance on, any of the Purchased Shares;

Each such Contract listed in Schedule 4.12(a) being referred to herein as a “Material Contract” and, collectively, the “Material Contracts”).

(b) All copies of Material Contracts that have been provided to the Parent are true, complete and accurate in all material respects.

(c) Seller and each of the Acquired Aether Entities has performed all of the obligations required to be performed by it, and is entitled to all benefits under, and is not alleged to be in default in respect of any Material Contract. Each of the Material Contracts is (i) a valid and binding obligation of Seller or the Acquired Aether Entities as the case may be, enforceable against Seller or the Acquired Aether Entities, as the case may be, and to Seller’s Knowledge the other parties thereby, in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, receivership and similar laws affecting the enforcement of creditors’ rights generally, and general equitable principles, and (ii) except as disclosed on Schedule 4.12(c), there exists no breach, default or event of default or event, occurrence, condition or act, with respect to Seller or any Acquired Aether Entity or any of their respective Affiliates, or to Seller’s Knowledge, with respect to the other contracting party, which, with the giving of notice, the lapse of the time or the happening of any other event or conditions, would become a breach, default or event of default under any Material Contract including as a result of the execution, delivery and performance of this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby. Neither Seller nor any of the Acquired Aether Entities nor any of their respective Affiliates has received written or oral notice of default, breach, cancellation, modification or termination of any Material Contract. Except as set forth on Schedule 4.12(c), the execution, delivery and performance of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, will not give rise to any right of termination, acceleration or cancellation of any Material Contracts. To Seller’s Knowledge, none of the parties to any Material Contract intends to terminate or alter the provisions thereof by reason of the transactions contemplated herein or otherwise. Since the September 30, 2003, except as set forth on Schedule 4.12(c), neither Seller nor any Acquired Aether Entity, as the case may be in each instance, has waived any right under any Material Contract, amended or extended any Material Contract or failed to renew (or received notice of termination or failure to renew with respect to) any Material Contract.

(a) Schedule 4.13 lists each Employee Benefit Plan. To Seller’s Knowledge, each such Employee Benefit Plan has been maintained, funded and administered in accordance with the terms of such Employee Benefit Plan, complies in form and in operation in all respects with the applicable requirements of ERISA, the Code, and other Applicable Laws, except where the failure to so comply has not had or is not reasonably expected to have a Material Adverse Effect, and the Seller or the relevant Acquired Aether Entity has paid all contributions due in respect thereof. No contributions are required to be or made to or in respect of any of the Reuters UK Retirement Plan, the Reuters Pension Fund or the Nimbusbright Pension Scheme.

(b) None of such Employee Benefit Plans is a “multiemployer plan,” as defined in Section 3(37) of ERISA or a “defined benefit plan,” as defined in Section 3(35) of ERISA.

Section 4.14 Taxes. To Seller’s Knowledge, except as set forth on Schedule 4.14, each of Seller and the Acquired Aether Entities has filed all Tax Returns that it was required to file in a timely manner (within any applicable extension periods), each of which were correct and complete in all material respects. All Taxes owed by Seller or any Acquired Aether Entity (whether or not shown on any Tax Return) have been paid or adequately reserved for. Except as set forth on Schedule 4.14, no action, suit, proceeding or audit is pending against or with respect to the Business or any Acquired Aether Entity regarding Taxes and neither Seller nor any Acquired Aether Entity has waived any statue of limitations in respect of Taxes. All Taxes required to be withheld by any of the Acquired Aether Entities in connection with amounts paid to any employee, independent contractor or creditor or other Person on or prior to the Closing Date have (or by the Closing Date will have) been duly and timely paid to the proper Governmental Authority or properly reserved for in full as reflected on the Closing Net Working Capital Statement. There are no liens or Encumbrances for Taxes on any of the Purchased Assets, except for liens and Encumbrances for Taxes which are not yet due and payable. None of the Acquired Aether Entities is liable for the Taxes of any other Person pursuant to Section 1.1502-6 of Title 26 of the Code of Federal Regulations (or any similar provision of any Applicable Laws) except for Taxes of another Person which itself is an Acquired Aether Entity. Seller is not a foreign person as defined in Section 1445(b)(2) of the Code and the regulations thereunder. Set forth on Schedule 4.14(a) is a list containing the name of each of the Acquired Aether Entities and its entity classification under Sections 301.7701-2 and 301.7701-3 of Title 26 of the Code of Federal Regulations. The classification of each Acquired Aether Entity indicated on Schedule 4.14(a) is correct as a matter of U.S. federal income Tax law. Each of the Acquired Aether Entities which is required to be registered for VAT, or the equivalent in any relevant jurisdiction, is so registered.

Section 4.15 Environmental Matters. To Seller’s Knowledge, the Business is in compliance with the applicable Environmental Laws, except for such non-compliance is reasonably expected not have a Material Adverse Effect. Except as set forth on Schedule 4.15, neither Seller nor any Acquired Aether Entity has received any written notice, report or other information regarding any actual or alleged violation of the Environmental Laws, and any Liabilities or potential Liabilities, including any investigatory, remedial or corrective obligations, relating to the Business or its facilities arising under the Environmental Laws, the subject of which is reasonably expected to have a Material Adverse Effect.

Section 4.16 Compliance with Applicable Laws . Except as set forth on Schedule 4.16, Seller and the Acquired Aether Entities is in compliance with all Applicable Laws, the absence of which is reasonably expected to have a Material Adverse Effect. None of Seller or the Acquired Aether Entities has received any notice or other communication (whether oral or written) from any Governmental Authority or any other Person regarding any actual, alleged, possible or potential violation of, or failure to comply with, Applicable Laws.

(a) Except as set forth on Schedule 4.17(a), the Confidential Information Memorandum of Seller, dated July 2003 (the “CIM”) fairly presents the revenue, cost of revenue and gross margin of the Business for the fiscal year ended December 31, 2002 and each of the fiscal quarters ended March 31, 2003 and June 30, 2003.

(b) Each of the consolidated financial statements (including, in each case, any notes thereto and segment information included therein) contained in the Seller’s Annual Report on Form 10-K for the year ended December 31, 2002 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (collectively, the “SEC Reports”) were prepared in accordance with GAAP (except in each case as described in the notes thereto) applied on a consistent basis throughout the periods indicated and each presented fairly the financial position of Seller and its subsidiaries on a consolidated basis, as at the respective dates thereof and its results of operations, shareholders’ equity and cash flows for the respective periods indicated therein (subject, in the case of unaudited statements, to normal and recurring immaterial year-end adjustments and the absence of footnotes). Seller will prepare and set forth on Schedule 4.17(b) the November 30 Net Working Capital Statement. The November 30 Closing Net Working Capital Statement will be prepared by Seller in good faith and in a manner consistent with Seller’s past practices, is consistent with the Books and Records and presents fairly the balance sheet items of the Business reflected thereon as of the date thereof. The Closing Net Working Capital Statement to be delivered by Seller pursuant to Section 3.3 will be prepared by Seller in good faith and in a manner consistent with Seller’s past practices, will be consistent with the Books and Records and will present fairly the balance sheet items of the Business reflected thereon as of the date thereof.

Except as described on Schedule 4.18, there are no Liabilities of Seller or any of the Acquired Aether Entities that constitute Assumed Liabilities other than (a) Liabilities reflected on the September 30 Net Working Capital Statement, (b) Liabilities that have arisen since September 30, 2003, for trade or business obligations incurred in connection with the purchase of goods or services in the ordinary course of the Business and consistent with past practice, (c) obligations of continued performance under the Assigned Contracts and the Permits, (d) the line item “deferred revenue” as set forth on the September 30 Net Working Capital Statement and “deferred revenue” since September 30, 2003 booked in the ordinary course of the Business, consistent with past practices, and (e) as of Closing, Liabilities reflected on the Closing Net Working Capital Statement. As of the Closing Date, all promissory notes issued by Aether Systems Limited have been duly and fully repaid or released. All loans made to Acquired Aether Entities by IFX Infoforex Deutschland GmbH have been duly and fully repaid or released.

(a) All Accounts Receivable represent or will represent valid obligations arising from transactions actually made or services actually performed in the ordinary course of the Business. Unless paid prior to the Closing Date, the Accounts Receivable are or will be as of the Closing Date good and collectible net of the respective reserves shown on the Closing Net Working Capital Statement (which reserves have been established in accordance with GAAP).

Neither the Seller nor any of the Acquired Aether Entities or their respective Affiliates has received written notice of, not to Seller’s Knowledge is there any contest, Claim, defense or right of set-off related to any Accounts Receivable, other than returns in the ordinary and usual course of the Business. Except for the Accounts Receivable, neither Seller, the Acquired Aether Entities nor any of their respective Affiliates has extended any credit to any Person.

(b) All Accounts Payable represent or will represent valid obligations arising from transactions actually made or services actually performed in the ordinary course of the Business and, unless paid prior to the Closing Date, will not be more than thirty (30) days past due, except Accounts Payable being contested in good faith.

Section 4.20 Business Activity Restriction. Except as set forth on Schedule 4.20: there is no non-competition or other similar Contract, commitment or Order to which the Business, any of the Acquired Aether Entities or any of their respective Affiliates is a party or subject to that has or is reasonably expected to have the effect of prohibiting the conduct of the Business by Buyer, assuming the Buyer continues to operate the Business as it is presently operated, excluding Permitted Encumbrances. None of Seller, any of its Affiliates, any Acquired Aether Entity or any of their respective Affiliates has entered into any Contract that restricts any Acquired Aether Entity from selling, licensing or otherwise distributing any of its technology or products to, or providing services to, customers in any geographic area, during any period of time or in any segment of the Business.

(a) Schedule 4.21(a) contains a true and correct list of all employees (listed by job classification), and consultants of Seller and each of the Acquired Aether Entities (limited, in the case of Seller, to those Persons who work exclusively for the Business) (collectively, the “Employees”) as of the date set forth herein and a description of the rate and nature of all compensation payable by Seller or an Acquired Aether Entity to each such person. Except as set forth on Schedule 4.21(a), the employment or consulting Contract or arrangement of all such persons is terminable at will.

(b) Except as set forth on Schedule 4.21(b): (i) nether Seller nor any of the Acquired Aether Entities is a party to any Contract or collective Agreement with any labor organization, trade union or other representative of its employees; (ii) there is no unfair labor practice charge or complaint pending or, to Seller’s Knowledge, threatened against Seller or any of the Acquired Aether Entities; (iii) neither Seller nor any of the Acquired Aether Entities has experienced any labor strike, slowdown, work stoppage or similar labor controversy or any threat of such within the past three (3) years; (iv) no representation question has been raised respecting Seller’s or any Acquired Aether Entities respective employees working within the past three (3) years, nor are there any campaigns being conducted to solicit authorization or trade union recognition from Seller’s or any Acquired Aether Entities respective employees to be represented by any labor organization; (v) no Claim before any Governmental Authority brought by or on behalf of any employee, prospective employee, former employee, retiree, labor organization, trade union or other representative of Seller’s or any Acquired Aether Entities respective employees, is pending or, to Seller’s Knowledge, threatened against the Seller or any of the Acquired Aether Entities and, to the Seller’s Knowledge, there are no circumstances which may

give rise to such Claim; (vi) neither Seller nor any of the Acquired Aether Entities is a party to, or otherwise bound by, any Order relating to its employees or employment practices; (vii) Seller and each of the Acquired Aether Entities has paid in full to all of its employees all wages, salaries, commissions, bonuses, benefits and other compensation due and payable to such employees; (viii) none of the employees of the Seller or any Acquired Aether Entity is absent on maternity leave or long-term sickness or disability leave; (ix) the Seller and each Acquired Aether Entity has in relation to each of its employees complied in all material respects with all obligations imposed on it by all Applicable Laws and codes of conduct and practice relevant to the relations between it and any employee or trade union (including the UK Working Time Regulations 1998 and any obligations under any health and safety legislation or any legislation relating to the environment; (x) neither the Seller nor any Acquired Aether Entity has given or received any notice to terminate any Contract of employment of any of its employees which expires on or after the Closing Date; and (xi) neither the Seller nor any Acquired Aether Entity has offered a Contract of employment or for services to any Person.Section 4.22 Filings with the SEC. None of the Public Reports, as of its filing date (except to the extent that a subsequent filing amended information previously filed), contained with respect to the Purchased Assets, the AAE Purchased Assets, the Assumed Liabilities, the AAE Assumed Liabilities, the Purchased Shares, the Acquired Aether Entities or the Business any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

Section 4.23 Broker’s Fees. No agent, broker, firm or other Person acting on behalf of Seller or any Acquired Aether Entity is, or will be, entitled to any investment banking, commission, broker’s or finder’s fees from any of the parties hereto, or from any Affiliate of any of the parties hereto, in connection with any of the transactions contemplated by this Agreement, except for Goldman, Sachs & Co. and Ridgecrest Capital Partners, whose fees and expenses will be paid by Seller.

Section 4.24 Absence of Certain Changes or Events. Except as set forth on Schedule 4.24, since September 30, 2003, the Business has been conducted in the ordinary course consistent with past practice and there has not been:

(a) Any change in the Business, or any event, occurrence or circumstance that is reasonably expected to cause a Material Adverse Effect;

(b) Any change by Seller or any of the Acquired Aether Entities in its respective accounting methods, principles or practices other than as required by GAAP (it being understood that Seller is not aware of any such change other than as disclosed in the footnotes to the financial statements included in the SEC Reports);

(c) Except for changes set forth in Schedule 4.24 and changes in the ordinary course of the Business consistent with past practice, any increase in the compensation or benefits, establishment of any bonus, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards or restricted stock awards), stock purchase plan or Employee Benefit Plan maintained by, contributed to, or required to be contributed to by an Acquired Aether Entity, any increase in benefits under any such Employee Benefit Plan, or any other increase in the compensation payable or to become payable to any

employees that work exclusively in the Business or any employee or director of the Aether Acquired Entities;

(d) Any issuance or sale by an Aether Acquired Entity of any stock, notes, bonds or other securities or any option, warrant or other right that would permit a holder thereof to acquire an interest in any Acquired Aether Entity;

(f) Any damage, destruction or other casualty loss (whether or not covered by insurance), condemnation or other taking affecting the Purchased Assets or the AAE Purchased Assets;

(g) Any transaction with respect to the purchase, acquisition, lease, sale, disposition or transfer of any Purchased Assets, AAE Purchased Assets or to any capital expenditure (in each case, other than in the ordinary course of the Business in accordance with past practice) or creation of any Encumbrance on any of the Purchased Assets or any of the AAE Purchased Assets (in each case, other than Permitted Encumbrances);

(h) Any write-downs or write-ups (or failures to write down or write up in accordance with GAAP) of the value of any Inventory other than in the ordinary course of the Business consistent with past practice and in accordance with GAAP;

(i) Any failure to maintain the Purchased Assets or the AAE Purchased Assets in accordance with good business practice and in good operating condition and repair;

(j) Any modification, termination, waiver, amendment or other alteration or change in the terms or provisions of any Material Contract or a Permit;

(k) Any transfer or grant to any Person of any of Seller’s or any of an Acquired Aether Entity’s rights to any Intellectual Property, in each case other than in the ordinary course of Business;

(l) Any significant changes or turnover of the Employees that has caused or is reasonably expected to cause a Material Adverse Effect.

(m) Any adverse change in Seller’s or an Acquired Aether Entities’ relations with its customers and suppliers that has caused or is reasonably expected to cause a Material Adverse Effect;

(n) Any discharge or satisfaction of any Encumbrance, or payment of any material Liabilities in relation to the Business, other than in the ordinary course of the Business consistent with past practice; or failure to in relation to the Business pay or discharge when due any Liabilities in relation to the Business, the failure to pay or discharge of which has caused or is reasonably expected to cause a Material Adverse Effect; or

(o) Any Contract by Seller or an Acquired Aether Entity to do any of the foregoing.

(a) Aether owns directly all capital stock or other equity interests of Aether European Holdings and Aether European Holdings owns, directly or indirectly, all capital stock or other equity interests in each of the other Acquired Aether Entities, in each case free and clear of all Encumbrances.

(i) With respect to each Acquired Aether Entity, Schedule 4.25(a)(i) sets forth the authorized, issued and outstanding capital stock, other equity interests or securities of such Acquired Aether Entity, specifying: (A) the number of capital stock, other equity interests or securities issued or outstanding; and (B) the record and beneficial owners of such capital stock, other equity interests or securities. Except for rights and obligations created pursuant to this Agreement, neither Seller, any Acquired Aether Entity, nor any of their respective Affiliates, has entered into any Contract to sell, transfer or otherwise dispose of or any other Contract in any way relating to any such capital stock, other equity interests or securities of any Aether Acquired Entity.

(ii) Schedule 4.25(a)(ii) sets forth, with respect to each Acquired Aether Entity, the type of entity, its jurisdiction of organization and each foreign jurisdiction in which it is qualified to do business.

(b) Except as set forth on Schedule 4.25(b), for each Acquired Aether Entity, the Seller has delivered to Buyer correct and complete copies of (i) the Charter Documents as currently in effect; and (ii) the capital stock records or other similar records of equity interests, including the capital stock ledger or similar ledger.

(c) Except as set forth on Schedule 4.25(c), all issued and outstanding shares of capital stock of, or other equity interests in, the Acquired Aether Entities have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in full compliance with all Applicable Laws and are free and clear of all Encumbrances (other than restrictions on the transferability following the Closing of the Purchased Shares imposed by Applicable Law). In respect of each Acquired Aether Entity, there are no (i) outstanding preemptive rights, subscriptions, options, calls, warrants or other rights or Contracts to acquire, including by subscription, any capital stock, other equity interests or securities of any Acquired Aether Entity or of any of their Affiliates; (ii) outstanding capital stock, other equity interests or securities, instruments or obligations issued or granted by any Acquired Aether Entity or by Seller or any of their respective Affiliates that are or may become convertible into an Acquired Aether Entity’s capital stock, other equity interests or securities; (iii) Contracts, or other documents or arrangements under which any Acquired Aether Entity is or may become obligated to sell, issue or otherwise dispose of or redeem, purchase or otherwise acquire any of its capital stock, other equity interests or securities; or (iv) stockholder agreements, voting trusts or other Contracts that may affect the exercise of voting or any other rights with respect to an Acquired Aether Entity’s capital stock, other equity interests or securities. There are no outstanding Contractual obligations of any Acquired Aether Entity or any of their respective Affiliates to

provide funds to, or make any investment (in the form of a loan, capital contribution otherwise) in, any Person. There are no outstanding options to any of CI Law Trustees Limited, Warm Wool & Pile Limited Bo Kroll or any employees or former employees of Nimbusbright Limited to acquire any shares in any Acquired Aether Entity.

(d) Other than shares held by an Aether Acquired Entity in another Aether Acquired Entity, no Aether Acquired Entity holds any shares or equity interest in any body corporate, partnership or other undertaking.

Section 4.26 Bank Accounts. Schedule 4.26 sets forth a complete list of all bank accounts, savings deposits, money-market accounts, certificates of deposit, safety deposit boxes, and similar investment accounts with banks or other financial institutions maintained by or on behalf of each Acquired Aether Entity showing the depository bank or institution address, appropriate bank contact personnel, account number and names of signatories.

Section 4.27 Certain Customers and Suppliers. Schedule 4.27 lists, by dollar volume paid for the twelve-month period ended September 30, 2003, the ten (10) largest customers of the Business in the United States and the ten (10) largest customers of each Acquired Aether Entity (collectively, the “Major Customers”) and the 10 largest suppliers of the Business in the United States and the 10 largest suppliers of each Acquired Aether Entity (collectively, the “Major Suppliers”). Except as set forth on Schedule 4.27, and (i) all amounts owing from the Major Customers or to the Major Suppliers, if not in dispute, have been paid in accordance with their respective terms; (ii) none of the Major Customers or the Major Suppliers within the last six months has threatened in writing to cancel, or otherwise terminate, the relationship of such person with Seller or an Acquired Aether Entity, as the case may be; and (iii) none of the Major Customers or the Major Suppliers during the last six months has decreased materially or to Seller’s Knowledge, threatened to decrease or limit materially its purchases from, or sales to, Seller or an Acquired Aether Entity, as the case may be.

(a) Except as permitted by Applicable Laws, neither Seller, any of the Acquired Aether Entities, nor any of their respective Representatives (in their capacities as such) has (i) directly or indirectly, paid, or promised or offered to pay, or authorized the payment of, any money or other thing of value or used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses (A) relating to political activity or (B) to any Governmental Authority or their Representatives or to foreign or domestic political parties or campaigns or their Representatives or to any candidate for political or political party office; (ii) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iii) made any other payment in violation of Applicable Law.

(b) Each of the Seller and the Acquired Aether Entities is in material compliance with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”). Additionally, neither Seller, the Acquired Aether Entities nor any of their respective Representatives is included on: (i) the Office of Foreign Assets Control list of Specially Designated Nationals and Blocked Persons; (ii) the Annex to Executive Order 13224, as periodically amended, which sets

forth a list of Persons that have been identified as terrorists or supporters of terrorism; or (iii) any other watch list issued by any Governmental Authority.

Section 4.30 Sila Communications Scandinavia ApS. Except as disclosed on Schedule 4.30, Sila Communications Scandinavia ApS and Beyerholm & More ApS are currently in solvent liquidation and no Liabilities have been or will be incurred by any other Acquired Aether Entity in respect of the obligations or activities of either of such entities or their liquidation, including without limitation, the costs of their liquidation, and, in particular but without limitation, Aether Systems AB will not be Liable for any Taxes in Sweden or any other country arising from the obligations or activities or as a result of the liquidation of Sila Communications Scandinavia ApS or Beyerholm & More ApS.

Section 4.31 Books and Records. All Books and Records are true, correct and complete and have been made available to Buyer. All of the Books and Records have been prepared and maintained in accordance with good business practices and, where applicable, in conformity with GAAP and in compliance with all Applicable Laws.

Section 4.32 Affiliate and Representative Transactions. Except as disclosed on Schedule 4.32, no Affiliate or Representative of Seller, any Acquired Aether Entity or any of their respective Affiliates or Representatives is at the date hereof a party to any transaction with Seller, any of the Acquired Aether Entities, including any Contract or arrangement providing for the furnishing of services to or by, providing for rental of any property (including Intellectual Property) to or from, or otherwise requiring payments to or from Seller, any of the Acquired Aether Entities, or any of their respective Affiliates that in any such case relates to the Business, Purchased Assets, Acquired Aether Entities, AAE Purchased Assets, the Purchased Shares and Assumed Liabilities.

Section 4.33 Insurance. Schedule 4.33 sets forth a list of all insurance policies, fidelity and surety bonds and fiduciary liability policies covering the Purchased Assets, the AAE Purchased Assets, the Business or the Employees (the “Insurance Policies”), and true and complete copies of all such Insurance Policies have been delivered by Seller to Buyer. Schedule 4.33 sets forth a true and complete list of Claims made in respect of Insurance Policies during the three (3) years prior to the date hereof that related to Business. There is no Claim pending under any of such Insurance Policies as to which coverage has been questioned or denied. There is no Claim pending under any of the Insurance Policies as to which coverage has been questioned. All premiums due under all Insurance Policies have been paid and Seller and the Acquired Aether Entities are in compliance with the terms and conditions of all such Insurance Policies, in all material respects. All Insurance Policies are in full force and effect. To Seller’s Knowledge, there are no threatened termination of, premium increase with respect to, or uncompleted requirements under, any Insurance Policy. No premiums are or will be payable by Buyer under the Insurance Policies after the Closing in respect of insurance provided for periods prior to the Closing Date, except as accrued on the September 30 Net Working Capital Statement. The Purchased Assets, the AAE Purchased Assets and the Business are insured under such Insurance Policies in amounts and against risks usually insured against by Persons operating businesses similar to the Business.

Section 4.34 Product Defects; Product Warranties. Except as described on Schedule 4.34: (a) each product sold, leased or delivered, or service provided, by Seller and the Acquired Aether Entities in the Business has been in material conformity with all applicable Contractual commitments and all express and implied warranties, and (b) Seller and the Acquired Aether Entities do not have any Liability (and there is no pending or, to the Seller’s Knowledge, threatened Claim that could reasonably be expected to give rise to any Liability) for replacement or repair thereof or other Losses in connection therewith. Schedule 4.35 includes copies of the standard terms and conditions of sale or lease for Seller (containing applicable guaranty, warranty, and indemnity provisions).

Section 4.35 U.S. Leased Real Property. Seller has delivered to Buyer a true and complete copy of the U.S. Real Property Lease. The U.S. Real Property Lease is legal, valid, binding, enforceable and in full force and effect, subject to proper authorization and execution of such U.S. Real Property Lease by the other party thereto and the application of any bankruptcy or other creditor’s rights laws. Seller is not in breach or default under the U.S. Real Property Lease, and to Seller’s Knowledge, no event has occurred or circumstance exists which, with the delivery of notice, the passage of time or both, would constitute such a breach or default, except to the extent such breach or default would not have a Material Adverse Effect on the Business. To Seller’s Knowledge, the landlord(s) under the Real Property Leases are in full compliance with the terms of the Real Property Leases, and no uncured default by any such landlord(s) has occurred. Neither the Seller nor any of the Acquired Aether Entities owns, leases or uses any property in the United States of America other than the U.S. Leased Real Property. The Real Property Leases listed on Schedule 4.35 set forth all of the agreements, whether written or oral, pursuant to which Seller or any Acquired Aether Party has an interest in the Leased Real Property. To Seller’s Knowledge, no party other than Seller or any Acquired Aether Party (as the case may be) has any oral or written right to lease, sublease or otherwise occupy any portion of the Leased Real Property. All rents, license fees and all other monetary obligations, payables and outgoings which have become due and payable by Seller or any Acquired Aether Entity in respect of the U.S. Leased Real Property have been paid. Neither Seller nor any Acquired Aether Party owes or will in the future owe any brokerage fees with respect to Real Property Leases.

The Seller or one of the Acquired Aether Entities, as the case may be, has in its possession, or under its control, all duly stamped deeds and documents which are necessary to prove good and marketable title to the UK Real Property. The Seller or one of the Acquired Aether Entities has duly performed and observed all covenants, conditions, agreements in accordance with the UK Lease and with all statutory requirements, planning consents, by-laws and orders affecting the UK Real Property, and neither Seller nor any Acquired Aether Entity has received notice of any breach of any such matter. Neither the Seller nor any of the Acquired Aether Entities owns, leases or uses any property in the United Kingdom other than the UK Real Property. All rents, license fees and all other monetary obligations, payables and outgoings which have become due pursuant to the UK Lease have been paid. There are no ongoing Claims relating to the UK Real Property and, to Seller’s Knowledge, no event has occurred and no circumstances exist which may result in any such Claims.

The Buyer and Parent represents and warrants to the Seller as follows, except as set forth on the Buyer’s Disclosure Schedule (which is arranged in sections corresponding to the Sections contained in this Article V and as to which the disclosure in any section of the Buyer Disclosure Schedule qualifies only the corresponding Section, unless it is reasonably apparent that the disclosure in any section or subsection of the Buyer Disclosure Schedule should apply to one or more other Sections):

Section 5.1 Organization and Good Standing. Each of Buyer and Parent is duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite power and authority to own, lease and operate its properties and to operate its business. Each of Buyer and Parent is duly qualified in each jurisdiction in which the ownership of property or the conduct of its business requires such qualification, except where the failure to do so would not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of the Buyer or Parent that adversely affects Buyer’s or the Parent’s ability to consummate the transactions contemplated by this Agreement.

Section 5.2 Corporate Authorization. Each of Buyer and Parent has full power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is a party, to perform its obligations under this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby on the terms set forth herein and therein. Each of this Agreement, the Deal License Agreement and the Transition Services Agreement has been duly executed and delivered by Buyer and Parent and, assuming the due execution of such agreement by Seller, is a valid and binding obligation of Buyer and Parent, enforceable against Buyer and Parent in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, receivership and similar laws affecting the enforcement of creditors’ rights generally, and general equitable principles.

Section 5.3 No Breach. The execution, delivery and performance by Buyer and Parent of this Agreement and the Ancillary Agreements to which it is a party, and the consummation by Buyer and Parent of the transactions contemplated hereby and thereby, do not and will not (a) contravene or conflict with the Charter Documents of Buyer or Parent or (b) violate any order, injunction, judgment, decree or award, federal, state, local or foreign law, ordinance, statute, rule or regulation to which Buyer or Parent is subject or by which Buyer or Parent or its properties may be bound, except where such violations, conflicts, breaches or defaults would not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of the Buyer that adversely affects Buyer’s or Parent’s ability to consummate the transactions contemplated by this Agreement.

Section 5.4 Availability of Funds. Buyer has sufficient cash available to enable it to consummate the transactions contemplated by this Agreement and consistent with the provisions of this Agreement and to satisfy the Assumed Liabilities as they become due in the ordinary course of the Business.

Section 5.5 No Other Representations. Each of Buyer and Parent acknowledge that Seller makes no representation or warranty with respect to (a) any projections, estimates or budgets delivered to or made available to Buyer and Parent of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of the Business, the Acquired Aether Entities or the Purchased Assets or the future business and future operations thereof or (b) except for Section 4.17(a), the CIM or any other information or documents made available to Buyer and Parent or its counsel, accountants or advisors with respect to the Business, the Acquired Aether Entities or the Purchased Assets or the businesses or operations thereof.

Section 5.6 Broker’s Fees. Neither Buyer nor Parent has any Liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement, except for Friedman, Billings & Ramsey, Inc., whose fees and expenses will be paid by Buyer.

Section 5.7 Private Financing. Parent, 033 Asset Management, LLC and The Riverview Group LLC have executed the term sheets attached to this Agreement as Exhibit I. As of the date of this Agreement, Parent, 033 Asset Management, LLC and The Riverview Group LLC are actively negotiating definitive agreements for the Private Financing on terms that are consistent with those contained in such Exhibit I and Parent reasonably anticipates that the Private Financing will be completed and funded prior to December 31, 2003.

Section 5.10 Claims and Proceedings. Except as set forth on Schedule 5.10, (i) there is no outstanding order of any Governmental Authority against or involving Buyer or Parent any subsidiary of Parent or any of their respective Affiliates that could defeat, defer or negatively impact the consummation of the transactions contemplated by this Agreement, and (ii) there is no Claim pending, or, to the knowledge of Buyer or Parent, threatened against Buyer or Parent, involving this Agreement or the transactions contemplated hereby.

Section 5.11 Securities Act. The Purchased Shares purchased by Buyer pursuant to this Agreement are being acquired for investment only and not with a view to any public distribution thereof, and the Buyer shall not offer to sell or otherwise dispose of the Purchased Shares so acquired by it in violation of Applicable Law.

(a) Access and Information. Upon reasonable notice, Seller shall grant, or cause to be granted to, Buyer, Parent and their Representatives, financing sources and other Representatives, during the period between the date of this Agreement and the Closing Date (the “Due Diligence Period”), reasonable access during normal business hours to the Purchased Assets, the AAE Purchased Assets and the Books and Records and other information of Seller

and the Acquired Aether Entities relating exclusively to the operations of the Business or of the Acquired Aether Entities. From the date of this Agreement through the Closing Date, Seller shall use commercially reasonable efforts to furnish, or cause to be furnished, to Buyer all data and information concerning the Purchased Assets, the AAE Purchased Assets and the Business which may reasonably be requested by Buyer and shall use all commercially reasonable efforts to make available, or cause to be made available, such personnel of Seller or the Acquired Aether Entities as may reasonably be requested for the furnishing of such data. Buyer shall have a right to designate certain of its Representatives as a transition team which may work from Seller’s premises in order to facilitate the orderly transfer of the Business to Buyer in accordance with the terms of this Agreement. Such transition team shall be given reasonable access to Seller’s management and other Representatives of the Business, including through attendance by such management and Representatives at meetings with the transition team. Seller shall use its commercially reasonable efforts to arrange due diligence calls with the Major Customers and Major Suppliers (in which the Seller shall participate) the purpose of which will be to allow Seller to confirm the existence and status of Material Contracts.

(b) Continued Operation of Business. Except as provided on Schedule 6.1(b), or as expressly required or contemplated by the terms of this Agreement, or unless Seller obtains Buyer’s prior written approval, from the date hereof through the Closing Date, Seller shall, and shall cause each Acquired Aether Entity to:

(i) operate the Business in a reasonable and prudent manner, to conduct Seller’s and each of the Acquired Aether Entities’ operations according to the ordinary and usual course consistent with past practice, to preserve intact Seller’s and each of the Acquired Aether Entities’ present business organization and structure, the goodwill of the Business, to preserve Seller’s rights to be assigned to Buyer hereunder, and to use commercially reasonable efforts to preserve Seller’s and each of the Acquired Aether Entities’ relationships with customers, suppliers, and other Persons having material business dealings with Seller and the Acquired Aether Entities that are material to the operation of the Business;

(ii) maintain the Books and Records in the usual and ordinary manner and in a manner that fairly and correctly reflects the income, expenses, assets and Liabilities of the Business in accordance with GAAP;

(iii) pay all Accounts Payable related to the Business on a current basis, but in no event later than thirty (30) days after they become due, except Accounts Payable being contested in good faith;

(iv) exercise commercially reasonable efforts to retain the employees identified on Schedule 4.21(a);

(v) use commercially reasonable efforts to preserve and maintain the Purchased Assets, the assets and properties of Seller not used exclusively in the Business but to be leased or licensed to Buyer pursuant to the Deal License Agreement, the Trademark License Agreement, and the AAE Purchased Assets in reasonably good operating condition, normal wear and tear excepted;

(vi) continue the pricing, procurement and purchasing policies of the Business, in accordance with past practice;

(vii) consult with Buyer prior to any renewal, amendment, extension or termination of, waiver of any right under, or any failure to renew, any Material Contract;

(viii) use commercially reasonable efforts to keep in full force and effect all of the Insurance Polices under the same terms and coverage; and

(ix) keep in full force and effect all of Seller’s insurance policies if the termination or nonreplacement of such policy is reasonably expected to have a Material Adverse Effect.

(c) Restrictions. Without Buyer’s prior written approval, until the Closing Date, Seller shall not, and shall not cause or permit any Acquired Aether Entity to, (a) dispose of, Encumber, sell, convey, assign or otherwise transfer any of the Purchased Assets or any of the AAE Purchased Assets that are used in the Business, except for Inventory and supplies in the ordinary course of business consistent with past practice, (b) enter into any new, or amend any existing, severance Contract, deferred compensation or arrangements, plans or programs for the benefit of the Employees or future Employees of the Business or any of the Acquired Aether Entities or grant any such Persons an increase in employee compensation other than in the ordinary course of business or pursuant to a promotion consistent with past practice and except that this clause (b) shall not be applicable to any Person who elects not to become a Transferred Employee, (c) incur any capital expenditures for the Business or for the benefit of any of the Acquired Aether Entities, or any obligations or Liabilities in respect thereof, except for those incurred in the ordinary course of Business, (d) pay Liabilities of the Business other than in the ordinary course of business consistent with past practice, (e) delay or postpone the payment of Accounts Payable or other Liabilities of the Business other than in the ordinary course of business consistent with past practice, (f) incur any Liability (other than Liabilities incurred in the ordinary course of the Business, consistent with past practice, which in the aggregate will not be material to the Business), (g) waive, release or cancel any Claims against third parties or debts owing to Seller or any Acquired Aether Entity, (h) authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, convertible or exchangeable securities, commitments, subscriptions, rights to purchase or otherwise) any shares of any Acquired Aether Entities’ capital stock or any other securities or amend any of the terms of any such securities; (i) terminate, modify, amend, waive or otherwise alter or change any of the terms or provisions of any Material Contract or create any default under the terms of any Material Contract; and (j) enter into any Contract which if in existence on the date hereof would have constituted a Material Contract or a Real Property Lease.

(d) IP License to Excluded Assets. Seller shall provide Buyer with a license to certain intellectual property in the Excluded Assets not exclusively used by Seller in the Business prior to the Closing Date on such terms and conditions as are set forth in the Deal License Agreement and the Trademark License Agreement.

(e) No Shop. (i) From and after the date hereof unless and until this Agreement shall have been terminated in accordance with its terms, Seller hereby agrees not to,

and shall cause its Representatives not to: (A) solicit, initiate, assist or encourage the making by any Person (other than the parties to this Agreement) of any proposal, offer or inquiry that constitutes, or is reasonably expected to lead to, a proposal for any acquisition by a third party of all or a portion of the Business, the Purchased Assets, the AAE Purchased Assets and/or the Purchased Shares (a “Competing Transaction”) or (B) participate in any discussions or negotiations regarding, or furnish or disclose to any Person any information with respect to, any Competing Transaction; provided, that (x) neither Seller nor its Representatives shall be in any way limited or restricted from discussing or negotiating, or otherwise taking any of the actions contemplated by subclauses (A) or (B) above with respect to, any transaction or proposal that does not involve the Business or that does not prevent Seller from completing the transactions contemplated by this Agreement (a “Non-Competing Transaction”), (y) this Section 6.1(e) shall not be applicable in any respect to a transaction or proposal that is a Non-Competing Transaction (and any such transaction or proposal shall not be deemed to be a “Competing Transaction” for any purpose under this Agreement), and (z) for the avoidance of doubt, in no event shall a Termination Fee be payable as a result of any actions by Seller or any of its Representatives with respect to a Non-Competing Transaction; provided further, however, that:

(1) Seller may take (and may permit its Representatives to take) any action described in subclause (B) above in respect of any Person, but only if (x) such Competing Transaction involves any merger, consolidation or other business combination involving Seller and a third party, or any acquisition by a third party of the issued and outstanding shares of Seller or all or substantially all of Seller’s assets (a “Company Sale”); and (y) Seller shall have first (x) terminated (or simultaneously terminates) this Agreement in accordance with Section 11.1(e) and (y) simultaneously paid the Termination Fee pursuant to Section 11.3; and

(2) Nothing herein shall limit Seller’s ability (x) to comply in good faith, to the extent applicable, with Exchange Act Rules 14d-9 and 14e-2 with regard to a tender or exchange offer made by any Person, or (y) to make any disclosure required by Applicable Law.

(ii) Seller hereby agrees and shall cause its Representatives to cease immediately all existing discussions or negotiations with any Person conducted on or before the date of this Agreement with respect to a Competing Transaction. Parent and Buyer acknowledge that, prior to the date of this Agreement, Seller solicited or caused to be solicited by its financial advisors indications of interest and proposals for a Competing Transaction.

(f) Confidentiality. Seller and its Affiliates will hold, and will use their reasonable best efforts to cause their respective Representatives to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of Applicable Law, all confidential documents and information concerning Buyer or any of its Affiliates (whether or not related specifically to the Business) that are furnished to Seller or its Affiliates, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Seller, (ii) in the public domain through no fault of Seller or (iii) later lawfully acquired by Seller from sources other than Buyer or any of its subsidiaries or any other Person not under a non-disclosure or confidentiality obligation in favor of Buyer or any of its subsidiaries; provided that Seller may disclose such information to its Representatives

who need to know such information for purposes of participating in the evaluation, negotiation and/or execution of the transactions contemplated by this Agreement and the Ancillary Agreements so long as such Persons are informed by Seller of the confidential nature of such information and are directed by Seller to treat such information confidentially. Seller shall be responsible for any failure to treat such information confidentially by such Persons. If this Agreement is terminated, Seller and its Affiliates will, and will use their reasonable best efforts to cause their respective Representatives to, destroy or deliver to Buyer, upon request, all documents and other materials, and all copies thereof, obtained by Seller or its Affiliates or on their behalf from Buyer or any of its subsidiaries in connection with this Agreement that are subject to such confidence. Notwithstanding the foregoing, effective upon, and only upon, the Closing, Seller’s obligations under this Section 6.1(f) shall terminate with respect to the Purchased Assets, the AAE Purchased Assets, the Assumed Liabilities, the AAE Assumed Liabilities, the Purchased Shares and the Business.

(g) Securities Matters. Except as specifically authorized by the Board of Directors of the Buyer, during the two year period commencing on the date of this Agreement, neither the Seller nor any of its Affiliates or their respective Representatives will, directly or indirectly, do any of the following:

(i) acquire, offer to acquire, or agree to acquire by purchase, individually or by joining a partnership, limited partnership, syndicate or other “group” (as such term is used in Section 13 (d)(3) of the Exchange Act) or Persons, any securities of the Buyer entitled to vote, or securities convertible into or exercisable or exchangeable for such securities (collectively “Voting Securities”);

(ii) make, or in any way participate directly or indirectly, any “solicitation” of “proxies” (as such terms are defined or used in Regulation 14A under the Exchange Act) or become a “participant” in any “election contest” (as such terms are defined or used in Rule 14a-11 under the Exchange Act) with respect to the Buyer, or initiate, propose or otherwise solicit stockholders of the Buyer for the approval of one or more stockholder proposals with respect to the Buyer or induce or attempt to include any other Person to initiate any stockholder proposal;

(iii) otherwise act along or in concert with others, to seek to control the management, Board of Directors, policies or affairs of the Buyer, or solicit, propose, seek to effect or negotiate with any other Person with respect to any form of business combination transaction with respect to a recapitalization or similar transaction with respect to the Buyer or any Affiliate thereof, solicit, make or propose or encourage or negotiate with any other Person with respect to, or announce an intent to make, any tender offer or exchange offer for any Voting Securities, or disclose an intent, purpose, plan or proposal with respect to the Buyer or any Voting Securities inconsistent with the provisions of this Section 6.1(g), including an intent, purpose, plan or proposal that is conditioned on or would require the Buyer to waive the benefit of or amend any provision of this Section 6.1(g), or assist, participate in, facilitate, encourage or solicit any effort or attempt by any Person to do any of the foregoing; or

(iv) encourage or render advice to or make any recommendation or proposal to any Person, or participate, aid and abet or otherwise induce any Person, to engage in any of the actions prohibited by this Section 6.1(g).

(h) Transfer of AAE Excluded Assets and Excluded Liabilities of Acquired Aether Entities. Seller covenants and agrees to take all commercially reasonable actions to remove, or cause to be removed, (i) all assets and properties of the Acquired Aether Entities listed on Schedule 6.1(h) (the “AAE Excluded Assets”) and (ii) the Excluded Liabilities of the Acquired Aether Entities (to the extent such Liabilities may be transferred out of the Acquired Aether Entities on a commercially reasonable basis) from the Acquired Aether Entities on or prior to the Closing Date in a fashion and with documentation reasonably acceptable to Buyer (with Seller’s responsibility continuing after the Closing in respect of the Excluded Liabilities of the Acquired Aether Entities being as specified in this Agreement, regardless of whether such Excluded Liabilities of the Acquired Aether Entities are transferred out of the Aether Acquired Entities). Buyer covenants that to the extent any AAE Excluded Asset has not been removed from the Aether Acquired Entities as of the Closing, it will cooperate reasonably with, and cause the appropriate Aether Acquired Entities to cooperate reasonably with, Seller in conveying (without payment of additional consideration by Seller) such AAE Excluded Assets to Seller (or Seller’s Affiliate, as requested by Seller) or otherwise providing Seller or its Affiliate with the benefit of such AAE Excluded Asset (in each case at the expense of Seller).

(i) Transition. The Seller will not take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier, or other business associate of the Business from maintaining the same business relationships with the Buyer after the Closing as it maintained with the Seller, the Acquired Aether Entities or their respective Affiliates prior to the Closing. The Seller will refer all customer inquiries relating to the Business to the Buyer from and after the Closing.

(j) Nonsolicitation of Employees. During the two years immediately following the Closing Date, Seller shall not, and shall not cause its Affiliates, to directly or indirectly employ, solicit or entice away any Transferred Employee or any Employee of the Acquired Aether Entities; provided that Seller and its Affiliates may engage in general solicitations not specifically directed at Transferred Employees or Employees of the Acquired Aether Entities and may employ any such person who approaches Seller or any of its Affiliates without having been solicited or enticed away from the Buyer.

(k) Seller shall cause Kris R. Keeney, Esq. to execute, and deliver to Seller, any and all instruments required to enable Seller to license or assign to Buyer, as applicable, the domain names listed on Schedule 4.11(a) or Exhibit B of the Trademark License Agreement, as applicable, which are currently registered by said individual.

Section 6.2 Covenants of Buyer and Parent. Each of Buyer and Parent covenants and agrees as follows:

(a) Confidentiality. Buyer and Parent and their Affiliates will hold, and will use their reasonable best efforts to cause their respective Representatives to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of

law, all confidential documents and information concerning Seller or any of its Affiliates (whether or not related specifically to the Business) that are furnished to Buyer, Parent or its Affiliates, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Buyer or Parent, (ii) in the public domain through no fault of Buyer or (iii) later lawfully acquired by Buyer or Parent from sources other than Seller or any of its subsidiaries or any other Person not under a non-disclosure or confidentiality obligation in favor of Seller or any of its subsidiaries; provided that Buyer or Parent may disclose such information to its Representatives who need to know such information for purposes of participating in the evaluation, negotiation and/or execution of the transactions contemplated by this Agreement and the Ancillary Agreements so long as such Persons are informed by Buyer or Parent of the confidential nature of such information and are directed by Buyer or Parent to treat such information confidentially. Buyer and Parent shall be jointly and severally responsible for any failure to treat such information confidentially by such Persons. If this Agreement is terminated, Buyer, Parent and their Affiliates will, and will use their reasonable best efforts to cause their respective Representatives to, destroy or deliver to Seller, upon request, all documents and other materials, and all copies thereof, obtained by Buyer, Parent or their Affiliates or on their behalf from Seller or any of its subsidiaries in connection with this Agreement that are subject to such confidence. Notwithstanding the foregoing, effective upon, and only upon, the Closing, Buyer’s and Parent’s obligations under this Section 6.2(a) shall terminate with respect to the Purchased Assets, the AAE Purchased Assets, the Purchased Shares, the Assumed Liabilities, the Excluded Liabilities and the Business.

(i) Effective as of the Closing Date, Buyer shall have offered employment to all Persons who are employees of the Business on the day immediately prior to the Closing Date and who are listed on Schedule 4.21(a) (including employees who are on an approved leave of absence, short-term disability leave or military leave, but not including any individual on long-term disability leave) with titles and job descriptions similar to those applicable to such employees immediately prior to the Closing Date. Employees who accept such offer of employment are referred to herein as “Transferred Employees.” Except as otherwise provided herein or in the Transition Services Agreement, effective as of the Closing Date the Transferred Employees will cease to participate in, or accrue any benefits under, Seller’s Employee Benefit Plans with respect to the Transferred Employees. In addition, any employee welfare benefit plan (as defined in Section 3(1) of ERISA) maintained by Buyer shall provide coverage for any pre-existing health condition of any Transferred Employee (and any eligible dependents or beneficiaries thereof), but only to the extent covered under an Employee Benefit Plan as in effect as of the date of this Agreement. Notwithstanding the foregoing, the Employees of the Acquired Aether Entities shall remain employees of the Acquired Aether Entities after the Closing.

(ii) Effective as of the Closing Date, Buyer will be responsible only for the obligations and associated Liabilities that arise pursuant to the continuation coverage requirements of COBRA as a result of “qualifying events,” as defined in COBRA, that occur with respect to Transferred Employees after the Closing Date.

(i) Buyer shall (x) replace all credit support arrangements provided by Seller or any of its Affiliates (excluding the Acquired Aether Entities), including any indemnity, guarantee, surety bond, letter of credit, cash or other collateral or escrow account in respect of the Business, the Purchased Assets or the Assumed Liabilities as set forth on Schedule 6.2(c) (the “Credit Support Agreements”); (y) release, or cause to be released, Seller and its Affiliates (excluding the Acquired Aether Entities) from any Liability or obligation to provide credit support in respect of the Business following the Closing; and (z) return, or cause to be returned, to Seller or its Affiliates (excluding the Acquired Aether Entities), as appropriate, all collateral that was provided by Seller or its Affiliates (excluding the Acquired Aether Entities) pursuant to a Credit Support Arrangement, in each case on or before the Closing.

(ii) After the Closing, neither Seller nor any of its Affiliates (excluding the Acquired Aether Entities) shall have any obligation to provide any credit support in respect of the Business, the Purchased Assets or the Assumed Liabilities.

(d) Financing. (i) Parent shall use its reasonable best efforts to complete the Private Financing (and receive the proceeds from such Private Financing) as promptly as practicable. Parent shall promptly notify Seller upon the signing of definitive agreements for the Private Financing and then again upon the funding of the Private Financing. If Parent is unable to complete the Private Financing by January 31, 2004, it shall promptly notify Seller of such fact (such notice, the “Substitute Financing Notice”).

Section 6.3 Mutual Covenants. Buyer, Parent and Seller covenant and agree as follows:

(a) Regulatory Approvals, Notices and Filings. Buyer, Parent and Seller shall cooperate with one another in (i) determining whether any other action by or in respect of, or filing with, any Governmental Authority is required in connection with the consummation of the transactions contemplated hereby and (ii) seeking any such other actions, making any such filings or furnishing information required to be filed pursuant to Applicable Law. Without limiting the generality of the foregoing, Buyer, Parent and Seller shall each file any Notification and Report Forms and related material that it may be required to file in connection with the transactions contemplated by this Agreement with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice under the HSR Act and with any Foreign Antitrust Administrator under Foreign Antitrust Laws, shall each use its diligent efforts to obtain an early termination of the applicable waiting period, and shall each make any further filings pursuant thereto that may be necessary, proper or advisable. Each Party shall permit the other Party to review any communication given by it to, and consult with each other in advance of any meeting or conference with, any Governmental Authority or, in connection with any proceeding by a private party, with any other Person, and to the extent permitted by the applicable Governmental Authority or other Person, give the other Party the opportunity to attend and participate in such meetings and conferences, in each case in connection with the transactions contemplated hereby. Except as otherwise provided herein, Buyer and Seller shall bear the costs and expenses of their respective filings; provided that the costs and expenses associated with filings made on behalf of both Buyer and Seller shall be shared equally.

(b) Consents. (i) Seller shall, and shall cause the Acquired Aether Entities to, take such actions as are commercially reasonable and necessary, and Buyer and Parent shall reasonably cooperate with Seller in all material respects, to obtain any consent with respect to any Material Contract that is to be assigned to Buyer pursuant to this Agreement and requires consent for the assignment thereof and any other consent, novation, approval or waiver that is required to be obtained from parties to any Material Contract in connection with the consummation of the transactions contemplated hereby as of the Closing Date (the “Required Consents”); provided, however, that such actions by Seller or an Acquired Aether Entity shall not include any requirement of Seller or an Acquired Aether Entity to commence any litigation or offer or grant any accommodation (financial or otherwise) to any third party. (ii) Buyer shall pay all amounts owed to any licensor (“Licensor Fees”) incurred in connection with obtaining any consent, novation, approval or waiver for any Contract set forth on Schedule 4.11(e), and Seller shall not be required to reimburse or otherwise bear, and shall have no liability to Parent, Buyer or any other party for, any such Licensor Fees. Notwithstanding the foregoing, in the event Seller is unable, prior to the Closing Date, to obtain the consent, novation, approval or waiver of the other party to any Contract set forth on Schedule 4.11(e), Seller shall reimburse Parent or Buyer, as the case may be, for any charges, penalties or other fees, as well as reasonable, directly related costs and expenses (but not Licensor Fees) actually paid by Parent or Buyer, as the case may be, to such other party that result directly from such failure, but only in an amount not to exceed $250,000 in the aggregate for all such Contracts. It is understood and agreed that (A) the amount of any such charges, penalties or other fees, as well as costs or expenses, shall not be included in the calculation of, and shall not be subject to, the Minimum Loss under Section 8.7 or the other monetary limitations set forth in Section 8.7 and (B) Parent and Buyer shall not be entitled to indemnification for the amount of any such charges, penalties or other fees, or costs or expenses, in excess of $250,000 under Article 8 or any other provision hereunder.

(c) Amendment of Seller Disclosure Schedule. Seller, Parent and Buyer agree that, with respect to the representations and warranties of the Seller contained in Article IV hereof, the Seller shall have the continuing obligation until the Closing Date to supplement, modify or amend promptly the Seller Disclosure Schedule with respect to: (i) any matter occurring after the date hereof that, if existing or occurring on or before the date of this Agreement, would have been required to be set forth or described in the Seller Disclosure Schedule (the “Seller New Matters”), and (ii) other matters which are not Seller New Matters but should have been set forth or described in the Seller Disclosure Schedule as of the date hereof (the “Seller Other Matters”). Any such supplement, modification or amendment (i) that reflects a Seller New Matter shall qualify the Seller’s representations and warranties for all purposes of this Agreement, except for purposes of determining whether the conditions set forth in Article VII hereof have been fulfilled and (ii) that reflects one or more Seller Other Matters shall not qualify any of the Seller’s representations or warranties for any purpose under this Agreement, and shall be provided solely for informational purposes. On or before the Closing Date, the Seller will prepare and deliver to Buyer a copy of the Seller Disclosure Schedule revised to reflect any supplement, modification or amendment required pursuant to this Section 6.3(c). Seller shall use commercially reasonable efforts to deliver any such supplemented, modified or amended Seller Disclosure Schedule to Buyer at least five (5) Business Days before the Closing Date. If no supplemented, modified or amended Seller Disclosure Schedule satisfying the

foregoing requirements is provided by Seller, the Seller Disclosure Schedule as delivered upon the execution of this Agreement shall continue to apply.

(d) Amendment of Buyer Disclosure Schedule. Seller and Buyer agree that, with respect to the representations and warranties of the Buyer contained in Article V hereof, the Seller shall have the continuing obligation until the Closing Date to supplement, modify or amend promptly the Buyer Disclosure Schedule with respect to: (i) any matter occurring after the date hereof that, if existing or occurring on or before the date of this Agreement, would have been required to be set forth or described in the Buyer Disclosure Schedules (the “Buyer New Matters”), and (ii) other matters which are not Buyer New Matters but should have been set forth or described in the Buyer Disclosure Schedule as of the date hereof (the “Buyer Other Matters”). Any such supplement, modification or amendment (i) that reflects a Buyer New Matter shall qualify the Buyer’s and Parent’s representations and warranties for all purposes of this Agreement, except for purposes of determining whether the conditions set forth in Article VII hereof have been fulfilled and (ii) that reflects one or more Buyer Other Matters shall not qualify any of the Buyer’s representations or warranties for any purpose under this Agreement, and shall be provided solely for informational purposes. On or before the Closing Date, the Buyer will prepare and deliver to Seller a copy of the Buyer Disclosure Schedule revised to reflect any supplement, modification or amendment required pursuant to this Section 6.3(d). The Buyer and Parent shall use commercially reasonable efforts to deliver any such supplemented, modified or amended Buyer Disclosure Schedule to Buyer at least five (5) Business Days before the Closing Date. If no supplemented, modified or amended Buyer Disclosure Schedule satisfying the foregoing requirements is provided by Buyer, the Buyer Disclosure Schedule as delivered upon the execution of this Agreement shall continue to apply.

(e) Notices of Certain Events. Prior to the Closing Date, Seller, on the one hand, and Buyer and Parent, on the other hand, shall promptly notify the other of:

(i) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated herein;

(ii) any notice or other oral or written communication from any Governmental Authority in connection with the transactions contemplated herein or relating to Business;

(iii) any event, condition or circumstance occurring from the date hereof through the Closing Date that would constitute a violation or breach of any representation or warranty, whether made as of the date hereof or as of the Closing Date, or that would constitute a violation or breach of any covenant of any Party;

(iv) any failure of Seller, Buyer or Parent as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder;

(v) any change that has had or is reasonably expected to have a Material Adverse Effect, or could delay or impede the ability of any of Seller or Buyer to

perform its obligations pursuant to this Agreement and to consummate the transactions contemplated herein.

(f) Public Announcements. Neither Buyer, Parent or Seller nor any of their respective Affiliates or Representatives shall issue or cause the publication of any press release or other announcement with respect to the transactions contemplated by this Agreement, without the prior approval of the other Party, which approval shall not be unreasonably withheld, except as may be required by Applicable Laws or by any listing agreement with a national securities exchange or NASDAQ. In the case of an announcement required by Applicable Laws or by a listing agreement, the Party required to make such announcement shall use reasonable efforts to provide the other Party with a copy of the proposed announcement prior to its release and will give due consideration to such comments as such other Party may have.

(g) Delivery of Property Received After Closing. After the Closing, (a) Seller shall promptly transfer to Buyer, from time to time, any cash or other property received or held by Seller or any of its Affiliates that is associated with or relates to the Purchased Assets, the AAE Purchased Assets or the Business and (b) Buyer promptly shall transfer to Seller, from time to time, any cash or other property received or held by Buyer or Parent that is associated with or related to the Excluded Assets or the AAE Excluded Assets.

(i) Seller will be responsible for the preparation and filing of all Tax Returns for all periods ending on or prior to the Closing Date as to which Tax Returns are due after the Closing Date (including the consolidated, unitary, and combined Tax Returns for Seller which include the operations of the Business for any period ending on or before the Closing Date). Seller will make all payments required with respect to any such Tax Return; provided, however, that Buyer will indemnify Seller pursuant to Article IX for any such Taxes that are Assumed Liabilities. For the avoidance of doubt, this Section 6.3(h)(i) shall not apply to Aether European Holdings and other Acquired Aether Entities.

(ii) Buyer will be responsible for the preparation and filing of all Tax Returns for the Business for all periods ending after the Closing Date as to which Tax Returns are due after the Closing Date including Tax Returns for the Straddle Period. Buyer shall permit Seller to review and comment on each such Tax Return described in the preceding sentence prior to filing. Buyer will make all payments required with respect to any such Tax Return; provided, however, that Seller will indemnify the Buyer to the extent any payment the Buyer is making is a Tax attributable to a taxable period ending on or before the Closing Date based on the principles in Section 9.1(c), except to the extent that such Taxes are Assumed Liabilities. For the avoidance of doubt, this Section 6.3(h)(ii) shall not apply to Aether European Holdings and other Acquired Aether Entities:

(iii) With respect to Aether European Holdings and all other Acquired Aether Entities:

(A) Seller will be responsible for the preparation and filing of all Tax Returns for all periods ending on or prior to the Closing Date as to which Tax Returns

are due after the Closing Date. Seller will make all payments required with respect to any such Tax Return.

(B) Buyer will be responsible for the preparation and filing of all Tax Returns for all periods ending after the Closing Date as to which Tax Returns are due after the Closing Date including Tax Returns for the Straddle Period. Buyer shall permit Seller to review and comment on each such Tax Return described in the preceding sentence prior to filing. Buyer will make all payments required with respect to any such Tax Return and Seller shall not be liable for any Taxes with respect to such Tax Returns, except as otherwise provided in Article IX.

(C) Except to the extent required by Applicable Laws, Buyer shall not permit Aether European Holdings and any other Acquired Aether Entity to take any action after the Closing Date which could increase the Seller’s Liability for Taxes (including any Liability of the Seller to indemnify the Buyer for Taxes pursuant to this Agreement).

(D) Except to the extent required by Applicable Laws, Buyer shall not, without prior written consent of the Seller, amend any Tax Return filed by, or with respect to, Aether European Holdings and any other Acquired Aether Entity for any taxable period, or portion thereof, beginning before the Closing Date.

(iv) This Section 6.3(h)(iv) shall apply to both the Purchased Assets and to Aether European Holdings and other Acquired Aether Entities. Each Party shall, at its own expense, control any tax audit or examination by any Governmental Authority, and have the right to initiate any claim for refund or amended return, and contest, resolve and defend against any assessment, notice of deficiency or other adjustment or proposed adjustment of Taxes (“Proceedings”) for any taxable period for which that Party is charged with payment or indemnification responsibility under Article IX. Each Party shall promptly forward to the other Party all written notifications and other written communications, including (if available) the original envelope showing any postmark, from any Governmental Authority received by such Party relating to any Liability for Taxes for any taxable period for which such other Party is charged with payment or indemnification responsibility under Article IX. Each Indemnifying Party shall promptly notify, and consult with, each Indemnified Party as to any action it proposes to take with respect to any Liability for Taxes for which it is required to indemnify the Indemnified Party. The Indemnified Party shall not enter into any closing agreement or final settlement with any Governmental Authority with respect to any such Tax Liability without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld. In the case of any proceedings relating to any Straddle Period, the Parties shall jointly control such proceedings and shall cooperate with each other as to the conduct of such proceedings. Each Party shall, at the expense of the requesting Party, execute or cause to be executed any powers of attorney or other documents reasonably requested by such requesting Party to enable it to take any and all actions such Party reasonably requests with respect to any proceedings which the requesting Party controls. The failure by a Party to provide timely notice under this subsection shall relieve the other Party from its indemnification obligations with respect to the subject matter of any notification not timely forwarded, to the extent the other Party has suffered a loss or other economic detriment because of such failure to provide notification in a timely fashion.

(i) Further Assurances. Upon the terms and subject to the conditions set forth in this Agreement, each of the Parties shall use their respective commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including the execution and delivery of any additional instruments reasonably necessary to consummate the transactions contemplated by this Agreement and to fully carry out the purposes of this Agreement.

(j) Post Closing Accounts Receivable. After the Closing Date and continuing for a period of eighteen (18) months thereafter, Buyer shall in accordance with commercially reasonable business practices that are not materially less diligent than those used by the Parent with respect to its own business operations, attempt to collect (and shall cause the Aether Acquired Entities to attempt to collect) the Accounts Receivable existing on the Closing Date (“Closing Date Accounts Receivables”). In determining the collectability of Closing Date Accounts Receivable, the Parties agree that all amounts collected after the Closing shall be applied to the oldest accounts first, unless an account debtor specifies that any one or more of the payments made by such account debtor is being made with respect to a particular outstanding Accounts Receivable of such account debtor, in which case such payment shall be applied as such account debtor so specifies. To the extent that Buyer receives payment from Seller under Article VIII in respect of any uncollected Closing Date Accounts Receivable (each such Account Receivable, a “Reimbursed Receivable”), Buyer shall transfer to Seller all remaining records pertaining to such Reimbursed Receivable and Seller shall be thereafter entitled to collect such Reimbursed Receivable for its own account. If after payment by Seller, any Reimbursed Receivable is collected by or on behalf of Buyer (including by any of the Aether Acquired Entities), Buyer shall promptly pay (or cause to be paid) over to Seller the amount collected.

(k) Lessor Consent. Each of Parent, Buyer and Seller shall take all commercially reasonable efforts, and shall reasonably cooperate in such effort, to obtain a consent from the lessor of the US Leased Property with respect to (i) the assignment of the US Lease to Buyer and (ii) the Sublease.

(l) Right to Use Certain Software. Seller shall pay all costs, expenses and fees (except any internal costs or expenses of Parent or Buyer, as the case may be) charged by the owner or licensor to obtain the right for Buyer to use the MarketFirst software (from Pivotal Corporation) and the StarTeam software (from Borland Software Corporation) in connection with the Business so that it operates substantially in the form as currently used and configured by Seller.

(m) Transition Services Agreement. Each of Parent and Seller acknowledges that the draft Transition Services Agreement attached hereto as Exhibit C represents the state of negotiation between the parties as of the execution of this Agreement and agrees to negotiate in good faith and to finalize the terms of a definitive Transition Services Agreement mutually acceptable to both Parties within five (5) Business Days of the execution of this Agreement.

Section 7.1 Conditions to Obligation of Each Party to Effect the Transactions Contemplated by this Agreement. The obligation of each Party to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following conditions:

(a) any waiting period (and any extension thereof) applicable to the consummation of this Agreement under the HSR Act, Foreign Antitrust Laws or other Competition Laws shall have expired or been terminated and Seller and Buyer have received all authorizations, consents and approvals of any Governmental Authority referred to in Section 4.6 hereof.

(b) no preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a Governmental Authority nor any Applicable Laws shall be in effect that would restrain or otherwise prevent the consummation of the transactions contemplated by this Agreement.

(c) no Claim instituted by any Person shall have been commenced or pending against Seller or Buyer or any of their respective Affiliates or Representatives, which Claim seeks to restrain, prevent, change or delay in any material respect the transactions contemplated herein or seeks to challenge any of the material terms or provisions of this Agreement or seeks material damages in connection with any of the transactions contemplated herein; and

(d) All consents, approvals and authorizations of Governmental Authorities legally required to be obtained to consummate the transactions contemplated herein shall have been obtained from such Governmental Authorities, except where the failure to obtain any such consent, approval or authorization could not reasonably be expected to result in a Material Adverse Effect.

Section 7.2 Conditions to the Obligation of Seller. Unless waived in writing by Seller, the obligation of Seller to effect the transactions contemplated by this Agreement is subject to the fulfillment at or prior to the Closing Date of the following conditions, any one or more of which may be waived in whole or in part by Seller:

(a) Each of Parent and Buyer shall have performed in all material respects each obligation and agreement and complied in all material respects with each covenant to be performed and complied with by it hereunder at or prior to the Closing Date;

(b) The representations and warranties of each of Parent and Buyer in this Agreement that are qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects as of the date hereof and as of the Closing Date (except to the extent such representations and warranties expressly relate to any earlier date, in which case such representations and warranties qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, in each case on and as of such earlier date), except for changes contemplated by this Agreement;

(c) Parent shall have furnished to Seller a certificate, dated as of the Closing Date, signed by a duly authorized officer of Parent to the effect that all conditions set forth in Sections 7.2(a) and (b) have been satisfied;

(d) Seller shall have received, or be satisfied that it will receive, evidence satisfactory to Seller, that all Credit Support Arrangements shall terminate prior to or contemporaneously with the Closing and Seller and its Affiliates shall cease to have any Liability or obligations thereunder or any obligation to provide additional credit support in respect of the Business following the Closing and that all collateral for such Credit Support Arrangements shall have been returned;

(e) On the Closing Date, Buyer shall have delivered to Seller all of the documents required to be delivered pursuant to Section 3.4.

Section 7.3 Conditions to the Obligation of Buyer and Parent. Unless waived in writing by Buyer and Parent, the obligations of both Buyer and Parent to effect the transactions contemplated by this Agreement is subject to the fulfillment at or prior to the Closing Date of the following conditions, any one or more of which may be waived in whole or in part by the Buyer and Parent:

(a) Seller shall have performed in all material respects each obligation and agreement and complied in all material respects with each covenant to be performed and complied with by it hereunder at or prior to the Closing Date;

(b) The representations and warranties of Seller in this Agreement that are qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects as of the date hereof and as of the Closing Date (except to the extent such representations and warranties expressly relate to any earlier date, in which case such representations and warranties qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, in each case on and as of such earlier date), except for changes contemplated by this Agreement;

(c) All the Required Consents shall have been obtained, shall be in such form and substance reasonably acceptable to Buyer, and shall have been delivered to Buyer; and

(d) Seller shall have furnished to Buyer a certificate, dated as of the Closing Date, signed by a duly authorized officer of Seller to the effect that all conditions set forth in Sections 7.3(a), (b), (c) and (f) have been satisfied.

(e) On the Closing Date, Seller shall have delivered to Buyer all of the documents required to be delivered pursuant to Sections 3.5(a), (c), (e), (g), (h) and (j); and

(f) During the period from the date hereof to the Closing Date, there shall not have occurred any of the actions described in Section 4.24(a), (c) (as to the Acquired Aether Entities), (d), (e), (g) (as to the Acquired Aether Entities), (k) and (m) (as to Major Customers and Major Suppliers).

Section 8.1 Survival; Right to Indemnification. All of the representations, warranties, covenants, agreements and Closing certifications made by each of Seller, Parent and Buyer shall survive the execution and delivery of this Agreement and the Closing hereunder for a period of eighteen (18) months following the Closing Date, except that (a) the representations and warranties contained in Section 4.1, Section 4.2, Section 4.3, Section 4.4, Section 4.8, Section 4.23, Section 4.25(a) (but excluding clause (ii) thereof), Section 4.25(b), Section 4.25(c), Section 5.1, Section 5.2, Section 5.5, Section 5.6, and Section 5.11, shall survive the Closing without time limit, (b) the representations and warranties contained in Section 4.13, Section 4.14, and Section 4.15 and Claims arising under Article IX shall expire on the date that is sixty (60) days after the last day of the shortest applicable federal or state statute of limitations or if there is no applicable statue of limitations, without time limit, (c) Claims related to fraud shall survive without time limit, (e) Claims related to Section 8.2(c), (d), (e), (f) or (g) or Section 8.3(c) or (d) shall survive without time limit, and (f) Claims with respect to covenants to be performed post-Closing shall survive for a period of eighteen (18) months following the last date such applicable covenant required performance, (g) the representations and warranties contained in the penultimate sentence of Section 4.17(b) shall not survive the Closing, and (h) the representations and warranties contained in Section 5.4 shall expire on the date that is sixty (60) days after the last day of the applicable statute of limitations with respect to “bulk-transfer laws” of any jurisdiction in which Purchased Assets are located. Following the Closing, the exclusive remedy pursuant to this Agreement and the transactions contemplated hereby based upon the survival of such representations, warranties, covenants, agreements and Closing certifications will be the rights to indemnification, payment of Losses and other remedies provided by this Article VIII and Article IX, except for Claims related to fraud. There shall be no termination of any representations, warranties, covenants, agreements and Closing certifications as to which a Claim has been asserted prior to the termination of such survival period.

Section 8.2 Seller’s Indemnity. Seller shall indemnify, defend and hold Buyer Indemnitees harmless from and against any Losses, subject to the limitations and provisions of this Article VIII, asserted against, imposed upon, resulting to, required to be paid by, or incurred by any Buyer Indemnitees, directly or indirectly, in connection with, arising out of, or which would not have occurred but for:

(a) the breach of any representation or warranty made by Seller in Article IV of this Agreement (other than Section 4.14, which shall be covered by Article IX), or in any certificate, document or agreement furnished pursuant hereto by Seller;

(b) any breach or nonfulfillment of any covenant or agreement of Seller under this Agreement (other than Section 6.3(h), which shall be covered by Article IX) or under any certificate, document or agreement furnished pursuant hereto by Seller;

(e) Seller’s, the Acquired Aether Entities’ or their respective Affiliates’ ownership, operation or use of the Purchased Assets, the Purchased Shares, the Business, or the AAE Purchased Assets prior to the Closing, other than the Assumed Liabilities and the AAE Assumed Liabilities, except to the extent such Losses relating thereto relate to or result from, directly or indirectly, a breach of any representation or warranty of Seller in this Agreement;

(g) Seller’s failure to comply with any bulk sales, bulk transfer or fraudulent transfer laws that may be applicable to this Agreement or the transactions contemplated hereby.

Section 8.3 Parent and Buyer’s Indemnity. Each of Parent and Buyer, jointly and severally, shall indemnify, defend and hold Seller Indemnitees harmless from and against any Losses, subject to the limitations and provisions of this Article VIII asserted against, imposed upon, resulting to, required to be paid by, or incurred by any Seller Indemnitees, directly or indirectly, in connection with, arising out of, or which would not have occurred but for:

(a) the breach of any representation or warranty made by Parent or Buyer in this Agreement or in any certificate, document or agreement furnished pursuant hereto by Parent or Buyer;

(b) any breach or nonfulfillment by Parent or Buyer of any covenant or agreement of Buyer under this Agreement (other than Section 6.3(h), which shall be covered by Article IX) or under any certificate, document or agreement furnished pursuant hereto by Parent or Buyer;

(c) the Assumed Liabilities, including Buyer’s (and, after the Closing, the Acquired Aether Entities’) failure to satisfy any of its obligations relating thereto, except to the extent such Losses relate to or result from, directly or indirectly, a breach of any representation or warranty of Seller in this Agreement; and

(d) the ownership, operation or use of the Purchased Assets, the Acquired Aether Entities, the Purchased Shares, the AAE Purchased Assets and the Business after the Closing (which do not include the Excluded Liabilities) by Buyer (and after the Closing, the Acquired Aether Entities); and

(e) any action (or inaction) of Buyer or Parent after the Closing that results in any Liabilities under the WARN Act.

(a) Promptly after receipt by any Party entitled to indemnity hereunder of the commencement of any Claim against such Party (the “Indemnified Party”), such Indemnified Party will, if a Claim is to be made against an indemnifying party under this Article VIII, give notice to the party obligated to provide indemnification pursuant to this Article VIII (the “Indemnifying Party”) of the commencement of such Claim, specifying the factual basis of the Claim and the amount thereof in reasonable detail to the extent then known by such Indemnified Party, but the failure to notify the Indemnifying Party will not relieve the Indemnifying Party of

any Liability that it may have to any Indemnified Party, except to the extent that the Indemnifying Party is actually prejudiced by the Indemnified Party’s failure to give such notice.

(b) If any third party Claim referred to in Section 8.4(a) is brought against an Indemnified Party, the Indemnified Party shall give notice to the Indemnifying Party of the commencement of such third party Claim within ten (10) Business Days after receipt by such Indemnified party of notice of the third party Claim. Thereafter, the Indemnified Party shall deliver to the Indemnifying Party, within five (5) Business Days’ after receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Claim. The Indemnifying Party will be entitled to participate in the defense of such third party Claim and, if it so chooses to assume the defense thereof with counsel selected by the Indemnifying Party, and reasonably acceptable to the Indemnified Party, if the Indemnifying Party gives written notice to the Indemnified Party of its election to assume the defense of such third party Claim within ten (10) Business Days after receiving notice thereof but only if: (i) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Liabilities asserted in or ultimately resulting from the third party Claim and fulfill its indemnification obligations hereunder; (ii) the Liabilities asserted in the third party Claim involves only money damages and do not seek an injunction or other equitable relief; and (iii) settlement of, or an adverse judgment with respect to, the Liabilities asserted in or ultimately resulting from the third party Claim shall not, in the reasonable good faith judgment of the Indemnified Party, be likely to establish a precedential custom or practice materially adverse to the continuing business interests of the Indemnified Party. If the Indemnified Party assumes the defense against any third party Claim described in clauses (ii) or (iii), the Indemnifying Party will not be bound by any determinations with respect to such third party Claims without its prior written consent, which consent shall not be unreasonably withheld. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such third party Claim (at its own expense and with its own counsel reasonably satisfactory to the Indemnified Party), the Indemnifying Party will not, as long as the Indemnifying Party diligently conducts such defense, be liable to the Indemnified Party under this Article VIII for any fees of other counsel or any other expenses with respect to the defense of such third party Claim, in each case subsequently incurred by the Indemnified Party in connection with the defense of such third party Claim unless the Indemnifying Party is also a party to such third party Claim, and counsel to the Indemnified Party determines in good faith and advises the Indemnifying Party that joint representation would give rise to a conflict of interest under (x) applicable standards of professional responsibility, or (y) because the Indemnified Party has or may have one or more defenses or counterclaims that are inconsistent with one or more of those that may be available to the Indemnifying Party in respect of such third party Claim. If the Indemnifying Party assumes the defense of a third party Claim, (i) no compromise or settlement of such third party Claim may be effected by the Indemnifying Party without the Indemnified Party’s consent unless (A) there is no finding or admission of any violation by any Indemnified Party of any Applicable Law or any violation by any Indemnified Person of the rights of any Person, and (B) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party; (ii) the Indemnifying Party will have no Liability with respect to any compromise or settlement of such third party Claim effected without the Indemnifying Party’s consent (which shall not be unreasonably withheld or delayed); and (iii) the Indemnified Party will cooperate, at the expense of he Indemnifying Party, as the Indemnifying Party may reasonably request in investigating,

defending and (subject to clause (i)) settling such third party Claim. If the Indemnifying Party elects not to defend a third party Claim, is not permitted to defend such third party Claim by reason of the subparagraphs (a) or (b) above of this Section 8.4(b) or fails to notify the Indemnified Party of its election as herein provided, the Indemnified Party may pay, compromise, settle or defend such third party Claim at the sole cost and expense of the Indemnifying Party if the Indemnifying Party is determined to be liable to the Indemnified Party hereunder. In any event, the Indemnified Party and the Indemnifying Party may participate, at their own expense, in the defense of any third party Claim.

Section 8.5 Procedure for Indemnification – Other Claims. A Claim for indemnification for any matter not involving a third party Claim may be asserted by notice from the Indemnified Party to the Indemnifying Party. Such notice shall specify the factual basis of such Claim and the amount thereof in reasonable detail to the extent then known by the Indemnified Party.

Section 8.6 Time Limitations; Indemnification by Securityholders. If the Closing occurs, the Indemnifying Party shall have no Liability pursuant to Section 8.2 or Section 8.3 or of this Agreement unless an Indemnified Party gives notice to the Indemnifying Party of an actual Claim under Section 8.2 or Section 8.3 within the applicable timeframe, if any, specified in Section 8.1, which notice shall specify the factual basis of that Claim in reasonable detail to the extent then known by such Indemnified Party.

Section 8.7 Monetary Limitations. Subject to the last sentence of this Section 8.7, Seller shall not be required to indemnify Buyer Indemnitees, and shall not have any Liability under Section 8.2(a), until the aggregate amount of all Losses under Section 8.2(a) exceeds $200,000 (the “Minimum Loss”), and then only to the extent such aggregate Losses exceed the Minimum Loss. Subject to the following sentence, the aggregate amount of each of Seller’s liability for Losses under Section 8.2(a) and Buyer’s and Parent’s aggregate liability for Losses under Section 8.2(b) shall be limited in each case to an amount equal to 40% of the Purchase Price. The limitations set forth in this Section 8.7 will not apply to any Claims for indemnification in connection with, arising out of, or which would not have occurred but for:

(a) a breach of the representations and warranties contained in Section 4.1, Section 4.2, Section 4.3, Section 4.5, Section 4.8, Section 4.14, Section 4.15, Section 4.19, Section 4.23, Section 4.25(a) (but excluding clause (ii) thereof), Section 4.25(b), Section 4.25(c), Section 4.29, Section 5.1, Section 5.2, Section 5.4 and Section 5.6;

and warranties contained in Section 4.19 shall be limited to, and determined by, a recalculation of the Closing Net Working Capital and the Adjustment Amount as if such Losses existed on the Closing Date (giving effect to any and all prior payments made pursuant to Section 3.2(d) in connection with the Purchase Price adjustment and any and all prior payments made pursuant to this clause (ii)), and no Losses shall be recoverable until and unless the aggregate amount of such Losses (for which no indemnification has been made and no adjustment was made in connection with the Purchase Price adjustment pursuant to Section 3.2(d)) exceeds on a cumulative basis the Adjustment Floor (as increased or reduced by any payment made in connection with the Purchase Price adjustment pursuant to Section 3.2(d) and the aggregate amount of all prior payments made pursuant to this clause (ii)), and then Seller’s indemnification liability shall only be the amount of the excess of such Losses over the Adjustment Floor (as adjusted as described above). It is understood and agreed that the purpose of the foregoing clause (ii) is to treat any Losses resulting from a breach of the representations and warranties contained in Section 4.19 as if such Losses existed on the Closing Date and were included in the calculation of the Closing Net Working Capital in determining the Adjustment Amount and any required payments under Section 3.2(d), and to require any payments that would have been required to be made in connection with the Purchase Price adjustment under Section 3.2(d) if such Losses existed on the Closing Date (and such payments hereunder shall equal, and in no event exceed, the amount that would have been required to be paid under Section 3.2(d) in connection with the Purchase Price adjustment if such Losses existed on the Closing Date).

Section 8.8 Losses Net of Insurance; Taxes. The amount of any Losses for which indemnification is provided under Article VIII or Section 9.1 shall be net of (i) any amounts recovered by the Indemnified Party or any of its Affiliates pursuant to any indemnification by or indemnification agreement with any third party, (ii) any insurance proceeds or other cash receipts or sources of reimbursement received from the Indemnified Party or any of its Affiliates as an offset against such Losses (each source named in clauses (i) and (ii), a “Collateral Source”), and (iii) an amount equal to the present value of the net Tax benefit or net Tax cost, if any, available to or taken by the Indemnified Party or any of its Affiliates attributable to such Loss. The parties acknowledge and agree that no right of subrogation shall accrue or inure to the benefit of any Collateral Source hereunder. The Indemnifying Party may require an Indemnified Party to assign the rights to seek recovery pursuant to the preceding sentence; provided, that the Indemnifying Party will then be responsible for pursuing such recovery at its own expense. If the amount to be netted under this Section 8.8 from any payment required under Article VIII is determined after payment by the Indemnifying Party of any amount otherwise required to be paid to an Indemnified Party pursuant to this Article VIII, the Indemnified Party shall repay to the Indemnifying Party, promptly after such determination, any amount that the Indemnifying Party would not have had to pay pursuant to this Article VIII had such determination been made at the time of such payment. For purposes of Article VIII or Section 9.1, the amount of the Loss relating to any item included as a liability in calculating the Closing Net Working Capital shall be calculated net of the amount so included.

Section 8.9 Purchase Price Adjustment. All indemnification payments under this Article VIII shall be deemed adjustments to the Purchase Price for federal Tax purposes unless otherwise required by a determination made by a Governmental Authority.

Section 8.10 No Double Recovery. Notwithstanding the fact that any Party may have the right to assert Claims for indemnification under or in respect of more than one provision of this Agreement or another agreement entered into in connection herewith in respect of any fact, event, condition or circumstance, no Party shall be entitled to recover the amount of any Losses suffered by such Party more than once under all such agreements in respect of such fact, event, condition or circumstance, and an Indemnifying Party shall not be liable for indemnification to the extent the Indemnified Party has otherwise been fully compensated on a dollar for dollar basis for such Losses pursuant to the Purchase Price adjustment under Section 3.2(d).

(a) Buyer shall be liable for, and shall indemnify Seller Indemnitees against, all Taxes arising or resulting from (i) the conduct of the Business or the ownership of the Purchased Assets for taxable periods or portions thereof beginning after the Closing Date or (ii) any transaction relating to the Business or the Purchased Assets that Buyer or any of its Affiliates causes to occur on or after the Closing Date (excluding, subject to Section 3.7, the sale of the Business and the Purchased Assets to Buyer and the assumption of the Assumed Liabilities by Buyer pursuant to this Agreement).

(b) Seller shall be liable for and agrees to indemnify, defend and hold Buyer Indemnitees harmless from (i) any Tax imposed on any Acquired Aether Entity if and to the extent that such Tax arises in respect of a taxable period ended on or before the Closing (a “Tax Indemnity Period”), (ii) any Tax that constitutes a lien or Encumbrance on the Purchased Assets if and to the extent that such Tax arises in respect of a Tax Indemnity Period, (iii) any Tax or other Losses resulting from the inaccuracy or breach of any representation or warranty set forth in Section 4.14 or the breach of any covenants set forth in Section 6.3(h), and (iv) any costs and expenses (including, without limitation, reasonable expenses of investigation and attorneys’ fees and expenses) arising out of the imposition or assessment of any Tax, Losses or other costs described in clause (i), (ii) or (iii) (“Other Costs”), and the filing of any Returns for a taxable period ending on or before the Closing Date, including those incurred in the contest of good faith of any such imposition, assessment or assertion. Any Tax imposed as a result of the sale of the Business and the Purchased Assets to Buyer and the assumption of the Assumed Liabilities by Buyer pursuant to this Agreement shall be deemed to arise in respect of a Tax Indemnity Period.

(c) For purposes of subsections (a) and (b) of this Section 9.1, whenever it is necessary to determine the Liability for Taxes for a Straddle Period, such Taxes shall be apportioned between Seller and Buyer (A) in the case of Taxes other than income, sales and use and withholding taxes, on a per diem basis and (B) in the case of income, sales and use and withholding taxes, as determined as though the Straddle Period consisted of two taxable years or periods, one which ended on the Closing Date and the other which began at the beginning of the day following the Closing Date.

(d) Buyer shall pay to Seller the amounts received by Buyer or any of its Affiliates of any refund, abatement or credit of (A) Taxes which are attributable to the conduct of

the Business or the ownership of the Purchased Assets on or prior to the Closing Date and (B) any other Tax Assets. In the case of any Straddle Period, Buyer shall pay to Seller the amount received by Buyer or any of its Affiliates of any refund, abatement or credit of Taxes that would have been made had the Taxable Period ended on the Closing Date.

(e) Any assessment or other Claim by a Governmental Authority seeking to enforce or collect a Tax, Losses or Other Costs described in Section 9.1 shall be subject to the provisions of Section 8.4, 8.5, 8.6, 8.8 and 8.9 of this Agreement to the extent that Section 6.3(h)(iv) does not apply to such assessment or Claim.

(f) For the avoidance of doubt, notwithstanding any other contrary provisions of this Agreement, Seller shall not be liable for any Taxes or related Losses to the extent such Taxes or related Losses have been included as a liability in calculating the Closing Net Working Capital, or such Taxes or Losses are included in Assumed Liabilities.

(a) For a period of five (5) years after the Closing Date, in the event and for so long as any Party or any Acquired Aether Entity or any of their respective Affiliates is contesting or defending against any Claim in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving any Party or any Acquired Aether Entity or any of their respective Affiliates, the other Party or Acquired Aether Entity, as the case may be, will cooperate with the contesting or defending party and its counsel in the contest or defense, make available its personnel, and provide such testimony and access to its Books and Records as shall be reasonably necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending party (unless the contesting or defending party claims to be entitled to indemnification therefor under Article VIII or Article IX).

(b) For a period of five (5) years after the Closing Date, each Party shall provide such assistance as the other Party may from time to time reasonably request in connection with the preparation of Tax Returns required to be filed, any audit or other examination by any taxing authority, any judicial or administrative proceeding relating to Liability for Taxes, or any claim for refund in respect of such Taxes or in connection with any litigation and proceedings related to the Business, including making available documents, witnesses, employees for interviews, litigation preparation and testimony. The requesting party shall reimburse the assisting party for the out-of-pocket costs incurred by the assisting party.

Section 10.2 Tax Disclosure Authorization. Notwithstanding the Confidentiality Agreement or anything herein to the contrary, the Parties (and each Affiliate and Person acting on behalf of any Party) agree that each Party (and each Representative of such Party) may disclose to any and all Persons, without limitation of any kind, the transaction’s tax treatment and tax structure (as such terms are used in Code §§6011 and 6112 and regulations thereunder)

contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) provided to such Party or such Person relating to such tax treatment and tax structure, except to the extent necessary to comply with any Applicable Laws; provided, however, that such disclosure may not be made until the earlier of date of (A) public announcement of discussions relating to the transaction, (B) public announcement of the transaction, or (C) execution of an agreement to enter into the transaction. This authorization is not intended to permit disclosure of any other information including (without limitation) (A) any portion of any materials to the extent not related to the transaction’s tax treatment or tax structure, (B) the identities of participants or potential participants, (C) the existence or status of any negotiations, (D) any pricing or financial information (except to the extent such pricing or financial information is related to the transaction’s tax treatment or tax structure), or (E) any other term or detail not relevant to the transaction’s tax treatment or the tax structure.

Section 11.1 Termination Rights. This Agreement may be terminated at any time prior to the Closing as follows and in no other manner:

(b) after January 31, 2004 by either Seller or Parent, if the Closing has not occurred by that date and if failure to close is not the result of a breach of this Agreement; provided that if Parent has not completed the Private Financing, it shall not be permitted to terminate this Agreement pursuant to this Section 11.1(b) unless (i) if Parent has entered into definitive agreements for the Private Financing, such Private Financing shall have been completed and funded (or is not subject to any condition to funding other than the Closing), or (ii) if Parent has not entered into definitive agreements for the Private Financing, (x) Parent has complied in all respects with its obligations under Section 3.2(b) and Section 6.3(e) and (y) either (A) Seller has notified Parent that it does not wish to accept the Substitute Financing in lieu of cash consideration for the Purchase Price or (B) Seller has not entered into definitive agreements for the Substitute Financing by March 30, 2004;

(c) By Seller, if: (i) there has been a material misrepresentation or breach by Buyer or Parent of a representation or warranty contained herein and such material misrepresentation or breach, if curable, is not cured within ten (10) Business Days after written notice thereof from Seller; (ii) Parent or Buyer has committed a material breach of any covenant imposed upon it hereunder and, if curable, fails to cure such breach within ten (10) Business Days after written notice thereof from Seller; or (iii) any condition to Seller’s obligations hereunder becomes incapable of fulfillment through no fault of Seller and is not waived by Seller;

(d) By Parent, if: (i) there has been a material misrepresentation or breach by Seller of a representation or warranty contained herein and such material misrepresentation or breach, if curable, is not cured within ten (10) Business Days after written notice thereof from Parent; (ii) Seller has committed a material breach of any covenant imposed upon it hereunder and, if curable, fails to cure such breach within ten (10) Business Days after written notice

thereof from Parent; or (iii) any condition to Parent’s or Buyer’s obligations hereunder becomes incapable of fulfillment through no fault of Parent or Buyer and is not waived by Parent or Buyer;

(e) by Seller, if Seller determines to take any of the actions contemplated by subclauses (A) or (B) of Section 6.1(e) with respect to a Competing Transaction that is a Company Sale after having complied with the provisions of Section 6.1(e) and, concurrently with a termination pursuant to this Section 11.1(e), shall pay the Termination Fee owed pursuant to Section 11.3; and

(f) by Seller, at any time following Parent’s issuance of a Substitute Financing Notice.

In the event that a condition precedent to a Party’s obligation is not met, nothing contained herein shall be deemed to require any Party to terminate this Agreement, rather than to waive such condition precedent and proceed with the Closing.

Section 11.2 Effect of Termination. In the event of termination by Parent or Seller pursuant to this Article XI, written notice thereof shall forthwith be given to the other Party and the transactions contemplated by this Agreement shall be terminated, without further action by any Party, except as otherwise required by Section 11.3. If the transactions contemplated by this Agreement are terminated as provided herein:

(a) Parent and Buyer shall return to Seller all documents and copies and other materials received from or on behalf of Seller relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof;

(b) all confidential information received by Parent and Buyer with respect to the Purchased Assets, the Assumed Liabilities, the Acquired Aether Entities and the Business shall be treated in accordance with the terms and conditions of Section 6.2(a); and

(c) no Party hereto shall have any Liability or further obligation under this Agreement resulting from such termination except (i) that the provisions of Section 6.1(g), Section 6.2(a), Section 12.5, Section 12.10 and this Article XI shall remain in full force and effect; and no Party waives any Claim against a breaching Party to the extent such termination results from the breach by a Party of any of its representations, warranties, covenants or agreements set forth in this Agreement.

Section 11.3 Fee to Parent. If this Agreement is terminated by Seller pursuant to Section 11.1(e), then Seller shall promptly pay to Parent a termination fee of Twelve Million Dollars ($12,000,000) (the “Termination Fee”), in cash by wire transfer in immediately available funds to an account designated by Parent.

Section 12.1 Further Assurances. From time to time, at Parent’s, Buyer’s or Seller’s request, whether before or after the Closing Date, Parent, Buyer or Seller, as the case may be,

shall, and shall cause their respective Affiliates and Representatives to, execute and deliver such further instruments of conveyance, transfer and assignment, cooperate and assist in providing information for making and completing regulatory filings prior to or after the Closing, and take such other actions as Parent, Buyer or Seller, as the case may be, may reasonably require of the other Party to more effectively assign, convey and transfer to such Party the Purchased Assets, the AAE Purchased Assets, the Acquired Aether Entities and the Purchased Shares, and to assume the Assumed Liabilities and the AAE Assumed Liabilities, as contemplated by this Agreement.

Section 12.2 Notices. All notices or other communications required or permitted to be delivered hereunder shall be in writing and shall be delivered by hand or sent by prepaid telex or telecopy, or sent, postage prepaid, by registered, certified or express mail, or reputable overnight courier service and shall be deemed delivered when so delivered by hand, telexed or telecopied with acknowledged receipt, or if mailed, five (5) calendar days after mailing (one (1) Business Day in the case of express mail or overnight courier service), as follows:

or such other address or facsimile number as such Party may hereafter specify in writing for the purpose by notice to the other Parties hereto.

Section 12.3 Governing Law; Submission to Jurisdiction. This Agreement shall be deemed to be made in and in all respects shall be interpreted, construed and governed by and in accordance with the law of the State of Maryland without regard to the conflict of law principles thereof. Courts within the State of Maryland will have jurisdiction over all disputes between the parties hereto arising out of or relating to this Agreement and the Ancillary Agreements and any agreements, instruments and documents contemplated hereby or thereby and the transactions contemplated hereby and thereby. The Parties hereby consent to and agree to submit to the jurisdiction of such courts. Each of the Parties hereto waives, and agrees not to assert in any such dispute, to the fullest extent permitted by Applicable Law, any Claim that (i) such Party is not personally subject to the jurisdiction of such courts, (ii) such Party and such Party’s property is immune from any legal process issued by such courts or (iii) any litigation commenced in such courts is brought in an inconvenient forum.

Section 12.4 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT AND THE ANCILLARY AGREEMENTS AND ANY AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY OR THEREBY AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.

Section 12.6 Bulk Transfer Laws . Buyer acknowledges that Seller will not comply with the provisions of any bulk transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement.

Section 12.7 Entire Agreement. This Agreement, the attached Schedules, the Ancillary Agreements and the agreements, instruments and documents referred to herein or executed simultaneously herewith, constitutes the entire agreement and understanding of the parties in respect to the transactions contemplated hereby and thereby and supersede all prior agreements, arrangements and undertakings, whether written or oral, relating to the subject matter hereof; provided that the Confidentiality Agreement shall continue in effect and shall remain legally binding upon and enforceable by the Parties in accordance with its terms with respect to the CIM and all other information that does not relate exclusively to the Business. Except as otherwise specifically provided in this Agreement, no conditions, usage of trade, course of dealing or performance, understanding or agreement purporting to modify, vary, explain or supplement the terms or conditions of this Agreement will be binding unless hereafter made in writing and

signed by the Party to be bound, and no modification will be effected by the acknowledgment or acceptance of documents containing terms or conditions at variance with or in addition to those set forth in this Agreement, except as otherwise specifically agreed to by the Parties in writing.

Section 12.8 Assignment. This Agreement and any rights and obligations hereunder shall not be assignable or transferable by Parent, Buyer or Seller (including by operation of Applicable Laws in connection with a merger or sale of stock, or sale of substantially all the assets, of Parent or Seller or their Respective Affiliates) without the prior written consent of the other Party, and any purported assignment without such consent shall be void and without effect. Notwithstanding the foregoing, Buyer may assign its rights under this Agreement to one of its Affiliates without Seller’s prior written consent.

Section 12.9 Amendment and Waiver. This Agreement may be amended, modified, superseded or canceled, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by the Parties hereto, or, in the case of a waiver, by or on behalf of the Party waiving compliance unless otherwise contemplated by this Agreement (including Section 6.3(c)). The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by any Party of any condition, or of any breach of any term, covenant, representation or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term, covenant, representation or warranty.

Section 12.10 Expenses. Whether or not the transactions contemplated hereby are consummated, and except as otherwise specifically provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including legal, due diligence, accounting and investment banking fees and expenses, shall be paid by the Party incurring such costs or expenses.

Section 12.11 Headings. The section and paragraph headings contained in this Agreement are for reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement.

Section 12.12 Counterparts. This Agreement may be executed in one or more counterparts (including by means of telecopied signature pages), all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Parties.

Section 12.13 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be valid and effective under Applicable Laws, but if any provision of this Agreement or the application of any such provision to any Person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof.

Section 12.14 No Third Party Beneficiaries. Except as provided with respect to indemnification as set forth in Article VIII and Article IX and except as otherwise expressly stated in this Agreement, nothing in this Agreement shall confer any rights upon any Person other than the Parties hereto and their respective heirs, successors and permitted assigns.

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement on the date first written above.

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of January 14, 2004 by and between Aether Systems, Inc. (the “Assignor”) and TSYS Acquisition Corp., a Maryland corporation (the “Assignee”), is being provided pursuant to a Purchase Agreement dated December 18, 2003 as amended by Amendment No. 1 dated as of January 13, 2004 (the “Purchase Agreement”), executed and delivered by the Seller, the Assignee, TeleCommunication Systems Limited, a company organized under the laws of England and the Assignee’s 100% parent, TeleCommunication Systems, Inc.

1. Assignment of Purchased Assets and Assumed Liabilities. Assignor does hereby irrevocably assign, transfer and set over to Assignee, its successors and assigns, all of Assignor’s right, title and interest in, to and under the Purchased Assets (including the Assigned Contracts) and the Assumed Liabilities.

2. Assumption of Purchased Assets and Assumed Liabilities. The Assignee hereby accepts the assignment of the Purchased Assets (including the Assigned Contracts) and the Assumed Liabilities hereby assigned to it, and expressly assumes and agrees, from and after the Closing Date, (a) to be bound by and to abide by the terms and conditions of the Purchased Assets (including the Assigned Contracts) and the Assumed Liabilities, and (b) to pay, perform and discharge, in due course, and satisfy faithfully as the same shall become due for payment, performance or discharge, all of the Purchased Assets (including the Assigned Contracts) and Assumed Liabilities. The Assignee has the power and authority, and has taken all action necessary, to execute, deliver and perform its obligations under this Agreement.

3. Further Actions. The Assignor covenants and agrees to warrant and defend the sale, conveyance, assignment, transfer and delivery of the Purchased Assets (including the Assigned Contracts) hereby made against all persons whomsoever, to take all steps reasonably necessary to establish the record of the Assignee’s title to the Purchased Assets (including the Assigned Contracts) and, at the request of the Assignee, to execute and deliver further instruments of transfer and assignment and take such other action as the Assignee may reasonably request to more effectively transfer and assign to and vest in the Assignee each of the Purchased Assets (including the Assigned Contracts).

4. Terms of the Purchase Agreement. The terms of the Purchase Agreement, including but not limited to the Assignor’s and the Assignee’s respective representations, warranties, covenants, agreements and indemnities relating to the Assigned Contracts, are incorporated herein by this reference. The Assignor and the Assignee acknowledge and agree that their respective representations, warranties, covenants, agreements and indemnities contained in the Purchase Agreement shall not be superseded hereby but shall remain in full force and effect to the full extent provided therein. This Assignment and Assumption Agreement

shall inure to the benefit of and be binding upon Assignee and Assignor and their respective assigns. In the event of any conflict or inconsistency between the terms of the Purchase Agreement and the terms hereof, the terms of the Purchase Agreement shall govern. Capitalized terms used herein but not defined shall have the meanings assigned to such terms in the Purchase Agreement.

IN WITNESS WHEREOF, the Assignor and the Assignee have executed or caused this Agreement to be duly executed on the date and year first written above.

THIS BILL OF SALE dated as of January 14, 2004 from Aether Systems, Inc. (the “Seller”), to TSYS Acquisition Corp., a Maryland corporation (the “TSYS”) and TeleCommunication Systems Limited, a company organized under the laws of England (“TCS Ltd.”), is being provided pursuant to a Purchase Agreement dated December 18, 2003 as amended by Amendment No. 1 dated as of January 13, 2004 (the “Purchase Agreement”), executed and delivered by the Seller, TSYS, TCS Ltd., and TSYS’s parent, TeleCommunication Systems, Inc.

1. Sale and Transfer of Assets and Liabilities. For good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, and as contemplated by Article II of the Purchase Agreement, the Seller hereby sells, conveys, assigns, transfers and delivers to the Buyer, effective as of the Closing, all of the Seller’s right, title and interest in and to all of the Purchased Assets and the Assumed Liabilities to TSYS and the Purchased Shares to TCS Ltd. TSYS expressly assumes and agrees, from and after the Closing Date, (a) to be bound by and to abide by the terms and conditions of the Purchased Assets and Assumed Liabilities, and (b) to pay, perform and discharge, in due course, and satisfy faithfully as the same shall become due for payment, performance or discharge, all of the Assumed Liabilities. Each of TSYS and TCS Ltd. has the power and authority, and has taken all action necessary, to execute, deliver and perform its obligations under this Bill of Sale. Neither TSYS nor TCS Ltd. shall not be liable for any Excluded Liabilities, as such term is defined in the Purchase Agreement.

2. Further Actions. The Seller covenants and agrees to warrant and defend the sale, conveyance, assignment, transfer and delivery of the Purchased Assets and the Purchased Shares hereby made against all persons whomsoever, to take all steps reasonably necessary to establish the record of TSYS’s title to the Purchased Assets and TCS Ltd.’s title to the Purchased Shares and, at the request of either of TSYS or TCS Ltd., to execute and deliver further instruments of transfer and assignment and take such other action as either TSYS or TCS Ltd. may reasonably request to more effectively transfer and assign to and vest in TSYS the Purchased Assets and in TCS Ltd. the Purchased Shares.

3. Terms of the Purchase Agreement. The terms of the Purchase Agreement, including but not limited to the Seller’s, TSYS’s and TCS Ltd.’s representations, warranties, covenants, agreements and indemnities relating to the Purchased Assets and the Purchased Shares, as applicable, are incorporated herein by this reference. The Seller, TSYS and TCS Ltd. acknowledge and agree that the representations, warranties, covenants, agreements and indemnities contained in the Purchase Agreement shall not be superseded hereby but shall remain in full force and effect to the full extent provided therein. In the event of any conflict or inconsistency between the terms of the Purchase Agreement and the terms hereof, the terms of the

Purchase Agreement shall govern. Capitalized terms used herein but not defined shall have the meanings assigned to such terms in the Purchase Agreement.

IN WITNESS WHEREOF, the Seller, TSYS and TCS Ltd. have executed or caused this Bill of Sale to be duly executed on the date and year first written above.

This AMENDMENT NO. 1 TO PURCHASE AGREEMENT (this “Amendment”) is made and entered into as of January 13, 2004, by and among Aether Systems, Inc., a Delaware corporation (“Seller”), TeleCommunication Systems, Inc., a Maryland corporation (“Parent”), TSYS Acquisition Corp., a Maryland corporation and a wholly owned subsidiary of Parent (“TSYS”), and TeleCommunication Systems Limited, a company organized under the laws of England and a wholly owned subsidiary of Parent (“TCS Ltd.”).

WHEREAS, Seller, TSYS and Parent have previously entered into that certain Purchase Agreement dated as of December 18, 2003 (the “Purchase Agreement”);

WHEREAS, the parties hereto wish to amend the Purchase Agreement to add TCS Ltd. as a party to the Purchase Agreement; and

WHEREAS, the parties hereto wish to amend the Purchase Agreement to provide for the payment of a portion of the consideration in common stock of the Parent.

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements set forth herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.1 Amendments to Preamble to the Purchase Agreement. The preamble to the Purchase Agreement shall be amended and restated in its entirety as follows:

‘This PURCHASE AGREEMENT (“Agreement”), is made and entered into as of December 18, 2003, by and among Aether Systems, Inc., a Delaware corporation (“Aether” or “Seller”), TeleCommunication Systems, Inc., a Maryland corporation (“Parent”), TSYS Acquisition Corp., a Maryland corporation and wholly owned subsidiary of Parent (“TSYS”), and TeleCommunication Systems Limited, a corporation formed under the laws of the United Kingdom and a wholly owned subsidiary of Parent (“TCS Ltd.,” and together with TSYS, the “Buyer”). TSYS, TCS Ltd., Parent and Seller are referred to collectively herein as the “Parties” and each is individually, a “Party.”’

1.2 Amendments to Recitals of the Purchase Agreement. The fourth recital to the Purchase Agreement shall be amended and restated in its entirety as follows:

‘WHEREAS, Seller desires to sell, convey, transfer, assign and deliver to TSC Ltd., and TCS Ltd. desires to purchase, all the issued and outstanding equity interests of Aether European Holdings; and’

(a) The following definitions shall be added to Article I of the Purchase Agreement in the appropriate alphabetical order:

‘“Accredited Investor” shall have the meaning set forth in Regulation D promulgated under the Securities Act.

“Cash Balance Adjustment Amount” shall have the meaning set forth in Section 3.3.

“Cash Balance Objection Notice” shall have the meaning set forth in Section 3.3.

“Cash Balance Resolution Period” shall have the meaning set forth in Section 3.3.

“Cash Balance Statement” shall have the meaning set forth in Section 3.3.

“Cash Consideration” shall have the meaning set forth in Section 3.2(a).

“Closing Cash Balance” shall have the meaning set forth in Section 3.3.

“Completed Financing Agreements” shall mean those financing agreements attached as Exhibit 10 to Parent’s Form 8-K as filed with the SEC on December 23, 2003.

“Effective Time Accounts Receivables” shall have the meaning set forth in Section 6.3(j).

“Effective Time Adjustment Amount” shall have the meaning set forth in Section 3.3A(a).

“Effective Time Cash” shall have the meaning set forth in Section 3.3A(a).

“Effective Time Payments” shall have the meaning set forth in Section 3.3A(a).

“Effective Time Statement” shall have the meaning set forth in Section 3.3A(a).

“Effective Time Statement Objection Notice” shall have the meaning set forth in Section 3.3A(b).

“Effective Time Statement Resolution Period” shall have the meaning set forth in Section 3.3A(b).

“Fair Market Value” shall have the meaning set forth in Section 3.2(a).

“Interim Period” shall mean the period of time from and after the Effective Time through the close of business of the day preceding the Closing.

“Note” shall mean that certain promissory note in the original principal amount of $1,000,000 made by Parent and payable to Seller and dated as of the Closing Date.

“Parent Common Stock” shall have the meaning set forth in Section 3.2(a).

“Parent Common Stock Consideration” shall have the meaning set forth in Section 3.2(a).

“Retained Cash” shall mean cash that Seller will not remove from the bank accounts of the Acquired Aether Entities prior to the Closing and that will not be AAE Excluded Assets, which cash, in aggregate, as estimated by Seller will total one million dollars ($1,000,000) as of the Closing Date. For the avoidance of doubt, Retained Cash does not include any cash of Beyerholm & Moe ApS or Sila Communications Scandinavia ApS.’

(b) The definition of the term “Ancillary Agreements” in the Purchase Agreement shall be amended and restated in its entirety as follows:

‘“Ancillary Agreements” shall mean the Note, the Transition Services Agreement, the Trademark License Agreement, the Deal License Agreement, the Bill of Sale, the Assignment and Assumption Agreement, Form 8954 and such other documents contemplated and necessary to effectuate the transactions contemplated herein.’

(c) The definition of the term “Assumed Liabilities” in the Purchase Agreement shall be amended and restated in its entirety as follows:

‘“Assumed Liabilities” shall mean shall mean (i) all Liabilities of the Business set forth on the Closing Net Working Capital Statement, (ii) Liabilities included in the line item “deferred revenue” as set forth on the Closing Balance Sheet, (iii) all Liabilities incurred in connection with, arising from or relating to Buyer’s (or any of its Affiliates’, including the Acquired Aether Entities’) ownership, operation, or use of the Business, including all of the Purchased Assets and the AAE Purchased Assets, from and after the Closing Date; (iv) all Liabilities incurred in connection with, arising from or relating to Seller’s (or any of its

Affiliates’, including the Acquired Aether Entities) ownership, operation, or use of the Business, including all of the Purchased Assets and the AAE Purchased Assets, during the Interim Period, but excluding any Liabilities resulting from, or action or omission in breach of, the covenants of Seller included in Section 6.1 of this Agreement; (v) without limiting the scope of any other subclause of this definition, all Liabilities arising under or resulting from the Assigned Contracts, but only to the extent such Liabilities involve the observance, payment, performance or discharge of (or failure to observe, pay, perform or discharge) obligations due and owing from and after the Effective Time, pursuant to the terms of such Assigned Contract; and (v) Liabilities arising under or relating to statutory rights under Applicable Law (such as notice requirements, seniority and similar rights) of Employees of the Acquired Aether Entities from and after the Effective Time and salary, bonus and benefit payments that have accrued but are not yet due and payable to Employees of the Acquired Aether Entities (including all Employees of the Acquired Aether Entities).’

(d) The definition of the term “Buyer Indemnitees” in the Purchase Agreement shall be amended and restated in its entirety as follows:

‘“Buyer Indemnitees” shall mean TSYS, TCS Ltd., their respective Affiliates (including Parent) and their respective Representatives.’

(e) The definition of the term “Closing Balance Sheet” in the Purchase Agreement shall be amended and restated in its entirety as follows:

‘“Closing Balance Sheet” shall mean an audited balance sheet of the Business as of the Effective Time prepared by the Seller in accordance with GAAP and delivered pursuant to Section 3.2(d).’

(f) The definition of the term “Closing Date Accounts Receivables” shall be deleted in its entirety from the Purchase Agreement and replaced in every instance where it appears with “Effective Time Accounts Receivables.”

(g) The definition of the term “Purchased Assets” in the Purchase Agreement shall be amended and restated in its entirety as follows:

‘“Purchased Assets” shall mean (i) the Leased Real Property, (ii) the Personal Property, (iii) the Permits, (iv) the Accounts Receivable, (v) the Intellectual Property, (vi) the Inventory, maintenance and operating supplies used exclusively in the Business as currently operated, (vii) the Books and Records, (viii) all Assigned Contracts, (ix) all data, records, files, manuals, blueprints and other documentation related exclusively to the Purchased Assets and the operation of the Business including service and warranty records, sales promotion materials, creative materials, art work, photographs, public relations and advertising material, studies, reports, correspondence and other similar documents and records used exclusively in the Business, whether in electronic form or otherwise, (x) all client, customer and supplier lists, telephone numbers and electronic mail addresses with respect to past, present or prospective clients, customers and suppliers, (xi) all catalogs and brochures relating exclusively to the Business, purchasing records and records relating to suppliers, (xii) copies of all personnel

records of the Transferred Employees, (xiii) all goodwill incident to the Business, (xiv) all Prepaid Expenses and security deposits relating exclusively to the Business (other than any collateral provided by Seller or its Affiliates (excluding the Aether Acquired Entities) in respect of Credit Support Arrangements), (xv) all insurance policies and insurance benefits in proportion to their relationship to the Purchased Assets, the AAE Purchased Assets, the Purchased Shares, the Acquired Aether Entities or the Business, (xvi) all other intangible assets (including all Claims, contract rights and warranty and product Liability Claims against third parties) in proportion to their relationship to the Purchased Assets, the Purchased Shares, the AAE Purchased Assets or the Business and (xvii) the Retained Cash. The Purchased Assets shall include the foregoing whether or not reflected on the Closing Balance Sheet, except for those assets which have been transferred or disposed of in the ordinary course of the Business after the date of September 30, 2003 and in accordance with this Agreement. For purposes of this Agreement, “Purchased Assets” shall not include the Purchased Shares or the AAE Purchased Assets, which are treated separately under Section 2.1, or the Excluded Assets or AAE Excluded Assets.’

(h) The definition of “Straddle Period” in the Purchase Agreement shall be amended and restated in its entirety as follows:

‘“Straddle Period” shall mean any taxable year or period beginning before and ending after the Effective Time.’

(i) The definition of “Tax Assets” in the Purchase Agreement shall be amended and restated in its entirety as follows:

‘“Tax Assets” shall mean any refund, abatement or credit of, and all other assets comprising receivables or deferred assets or prepayments for, Taxes arising or resulting from the conduct of the Business or ownership of the Purchased Assets or Purchased Shares by the Seller, Acquired Aether Entities or any of their respective Affiliates for taxable periods or portions thereof ending on or before the Effective Time.’

(j) The definition of “Tax Liabilities” in the Purchase Agreement shall be amended and restated in its entirety as follows:

‘“Tax Liabilities” shall mean all Liabilities for Taxes arising or resulting from the conduct of the Business or ownership of the Purchased Assets by the Seller, any Acquired Aether Entity or any of their respective Affiliates for taxable periods or portions thereof ending on or before the Effective Time.’

3.1 Amendments to Section 2.1 of the Purchase Agreement. Section 2.1 of the Purchase Agreement shall be amended and restated in its entirety as follows:

‘Section 2.1. Purchase and Sale of Purchased Shares. Subject to the terms and conditions of this Agreement, Seller shall sell, convey, transfer, assign and deliver to TCS Ltd., and TCS Ltd. shall purchase from Seller and accept from Seller, full legal and economic title to the Purchased Shares, free and clear of all Encumbrances other than any restrictions on the transferability following the Closing of the Purchased Shares imposed by Applicable Laws. The parties further agree that (a) prior to or as of Closing, as contemplated by Section 6.1(h), the Aether Acquired Entities shall cease to own the AAE Excluded Assets (with the term “AAE Purchased Assets” meaning, for purposes of this Agreement, all assets, properties and rights of the Acquired Aether Entities other than the AAE Excluded Assets), and (b) Seller, pursuant to the terms of this Agreement, shall remain responsible for, and shall indemnify the Buyer Indemnitees (including TCS Ltd. and the Acquired Aether Entities) from and against, the Liabilities of the Acquired Aether Entities that are not Assumed Liabilities.’

4.1 Amendments to Section 3.1 of the Purchase Agreement. Section 3.1 of the Purchase Agreement shall be amended and restated in its entirety as follows:

‘(a) Subject to the Parties’ satisfaction or waiver of the conditions precedent set forth in Article VII, the closing and consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place on January 9, 2004 at 10:00 a.m., Eastern Time, at the offices of Kirkland & Ellis LLP at 655 15th Street, NW, Suite 1200, Washington, DC 20005 and at such other places as the Parties may agree, or, if the conditions set forth in Article VII have not been satisfied or waived as of such date, on such later date that is mutually agreed between Seller and Buyer (such date being the “Closing Date”).

(b) The Parties agree that for financial, accounting, economic and tax purposes, the transactions contemplated by this Agreement shall be given effect as if the Closing had occurred as of the Effective Time. Accordingly, the Parties shall measure the Closing Net Working Capital as of the Effective Time and shall, after the Closing and pursuant to Section 3.3A, measure cash receipts and cash disbursements during the Interim Period and adjust the Purchase Price as contemplated by such Section 3.3A, such that the net cash receipts (or disbursements, as applicable) attributable to the Business during the Interim Period shall be for the account of the Buyer, as if the Buyer had owned and operated the Business during the Interim Period, despite the fact that legal title to the Purchased Assets, the AAE Purchased Assets and the Purchased Shares shall not have passed to Buyer until the Closing Date.’

(a) Section 3.2(a) of the Purchase Agreement shall be amended and restated in its entirety as follows:

‘(a) Subject to the terms and conditions set forth in this Agreement, in addition to the assumption by Buyer of the Assumed Liabilities, Buyer and Parent agree to pay at Closing

to Seller in consideration for the Purchased Shares and the Purchased Assets an aggregate purchase price equal to $20,000,000 (as adjusted based on the Closing Net Working Capital Statement pursuant to Section 3.2(d), the “Purchase Price”), which shall be comprised of (i) $18,000,000 in cash (the “Cash Consideration”), in immediately available funds by wire transfer to an account designated by Seller by written notice to Parent at least two Business Days prior to the Closing Date, (ii) the Note, and (iii) a number of shares (rounded to the nearest whole share) of Class A Common Stock of Parent, par value $0.01 per share (the “Parent Common Stock”), with an aggregate Weighted Average Price (calculated as the arithmetic average of the Weighted Average Price of the Common Stock for the five trading days immediately prior to the Closing Date) of $1,000,000. For purposes of this Agreement, “Weighted Average Price” means, for any security as of any date, the dollar volume-weighted average price for such security on the NASDAQ National Market during the period beginning at 9:30:01 a.m., New York Time (or such other time as the NASDAQ National Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as the NASDAQ National Market publicly announces is the official close of trading) as reported by Bloomberg Financial Markets through its “Volume at Price” functions, or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York Time (or such other time as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as such market publicly announces is the official close of trading) as reported by Bloomberg Financial Markets, or, if no dollar volume-weighted average price is reported for such security by Bloomberg Financial Markets for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period. The number of shares of Parent Common Stock issued to Seller in accordance with this Section 3.2(a) shall be referred to herein as “Parent Common Stock Consideration,” and, together with the Cash Consideration and the Note, as the “Consideration”).’

(b) Section 3.2(b)(i) of the Purchase Agreement shall be amended and restated in its entirety as follows:

‘(b)(i) If Parent has complied with its obligations in Section 6.3(e) and has properly delivered to Seller the Substitute Financing Notice, Parent shall not be required thereafter to pay the cash portion of the Purchase Price in cash, and the cash portion of the Purchase Price shall be payable as contemplated by this Section 3.2(b) (but only to the extent Seller agrees, in its discretion, to accept the Substitute Financing). Simultaneously with delivery to Seller of the Substitute Financing Notice, Parent shall offer to Seller the option to accept as the Purchase Price, in lieu of cash consideration, the securities contemplated by the Private Financing (on the terms set forth in Exhibit I, or on terms that were more favorable to the

provider of the Private Financing to the extent they were set forth in any Completed Financing Agreements), pro rated to reflect the difference between (A) the aggregate amount of the Private Financing and (B) the Purchase Price (the “Substitute Financing”). Parent shall hold such offer open, and such offer shall be irrevocable, for a period of thirty (30) days. Seller shall be entitled (but not obligated) to accept such offer by notifying Parent of its acceptance at any time within such 30-day period, with such acceptance being conditioned upon the negotiation of definitive agreements that are acceptable in form and substance to Seller (and not inconsistent with the terms of Exhibit I) and Seller’s completion of, and satisfaction in all respects with, its due diligence investigation of the Buyer. Parent shall thereafter use its reasonable best efforts to negotiate with Seller and execute, as promptly as practicable, definitive agreements for the Substitute Financing; provided, that Parent shall, if requested by Seller (at Seller’s sole and absolute discretion), enter into definitive agreements with Seller for the Substitute Financing having the same substantive terms as those contained in the Completed Financing Agreements.’

‘(d) As soon as practicable (and in any event within forty (40) days following the Closing), Seller shall prepare and deliver to Parent and its counsel the Audited Financial Statements, the Closing Balance Sheet, a statement (the “Closing Net Working Capital Statement”) setting forth Net Working Capital as of the close of business on the day immediately preceding the Effective Time (the “Closing Net Working Capital”) based on the Closing Balance Sheet, and all work papers and back-up materials relating thereto. The costs and expenses of preparing the Closing Balance Sheet and the Audited Financial Statements shall be borne 50% by Seller and 50% by Parent. Each of Parent and Buyer shall assist Seller and its Representatives in the preparation of the Closing Balance Sheet and shall provide Seller and its Representatives access at all reasonable times to the personnel, properties, Books and Records of the Business, including the Acquired Aether Entities, for such purpose. No changes shall be made in any reserve or other account existing as of the date of the Closing Balance Sheet except as (i) a result of events occurring after the date of the Closing Balance Sheet and, in such event, only in a manner consistent with past practices and (ii) as required by GAAP. The Closing Balance Sheet and the Closing Net Working Capital Statement shall be conclusive and binding on the Parties unless Parent gives written notice of any objections thereto setting forth in reasonable detail the amounts in dispute and the basis for such disagreement (a “Purchase Price Objection Notice”) to Seller within thirty (30) days after its receipt of the Audited Financial Statements, Closing Balance Sheet, Closing Net Working Capital Statement and all work papers and back-up materials relating thereto. If Parent delivers a Purchase Price Objection Notice as provided above, the Parties shall attempt in good faith to resolve such dispute, and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the Parties. If the Parties are unable to resolve, despite good faith negotiations, all disputes reflected in the Purchase Price Objection Notice within thirty (30) days thereafter (the “Purchase Price Resolution Period”), then the Parties will, within thirty (30) days after the expiration of the Purchase Price Resolution Period, submit any such unresolved dispute to an independent accounting firm mutually acceptable to Parent and Seller (the “Independent Accounting Firm”). Parent and Seller shall provide to the independent accounting firm all work papers and back-up materials relating to the unresolved disputes requested by the

Independent Accounting Firm to the extent available to Parent or its Representatives or Seller or its Representatives. Parent and Seller shall be afforded the opportunity to present to the Independent Accounting Firm any material related to the unresolved disputes and to discuss the issues with the Independent Accounting Firm. The determination by the Independent Accounting Firm, as set forth in a notice to be delivered to Parent and Seller within thirty (30) days after the submission of the unresolved disputes to the Independent Accounting Firm, shall be final, binding and conclusive on the parties. The fees and expenses of the Independent Accounting Firm shall be borne by Parent and Seller in inverse proportion as they may prevail on matters resolved by the Independent Accounting Firm, which proportionate allocations shall also be determined by the Independent Accounting Firm at the time the determination of the Independent Accounting Firm is rendered on the merits of the matters submitted. The Closing Net Working Capital reflected in the Closing Net Working Capital Statement, as revised to reflect the resolution of any and all disputes by the parties and/or the Independent Accounting Firm, shall be deemed to be the Closing Net Working Capital. The “Adjustment Amount” (which may be a positive or negative number) shall equal the amount determined by subtracting $3,750,020 (the “Initial Net Working Capital”) from the Closing Net Working Capital. Subject to the last sentence of this Section 3.2(d), if the Adjustment Amount is positive, the Adjustment Amount shall be paid by Parent via wire transfer of immediately available funds to the bank account designated by Seller. If the Adjustment Amount is negative, the Adjustment Amount shall be paid by Seller via wire transfer of immediately available funds to the bank account designated by Parent. All payments shall be made together with interest at the rate of 6% per annum, which interest shall begin accruing at the Effective Time and end on the date that the payment is made. Within five Business Days after the calculation of the Closing Net Working Capital becomes binding and conclusive on the parties, Seller or Parent, as the case may be, shall make the wire transfer payment provided for in this Section 3.2(d). Notwithstanding the foregoing, neither the Seller nor the Parent, as the case may be, shall have any liability to pay any Adjustment Amount to the other unless the aggregate Adjustment Amount due by the Seller or the Parent, as the case may be, exceeds $750,000 (the “Adjustment Floor”).’

4.3 Amendments to Section 3.3 of the Purchase Agreement. Section 3.3 of the Purchase Agreement shall be amended and restated in its entirety and shall read as follows:

‘Section 3.3 Cash Balance Adjustment. As soon as practicable (and in any event within thirty (30) days following the Closing), Parent shall prepare and deliver to Seller and its counsel a statement (the “Cash Balance Statement”) setting forth the balance of all cash held in all bank accounts of the Acquired Aether Entities as of the close of business on the day immediately preceding the Effective Time (the “Closing Cash Balance”) and any supporting documentation relevant thereto, including without limitation relevant bank statements. The costs and expenses of preparing the Cash Balance Statement shall be borne by Parent. The Cash Balance Statement shall be conclusive and binding on the Parties unless Seller gives written notice of any objections thereto setting forth in reasonable detail the amounts in dispute and the basis for such disagreement (a “Cash Balance Objection Notice”) to Seller within thirty (30) days after its receipt of the Cash Balance Statement and all supporting documentation relating thereto. If Seller delivers a Cash Balance Objection Notice as provided above, Parent and Seller shall attempt in good faith to resolve such dispute, and any resolution by them as to any disputed amounts shall be final, binding and conclusive. If Parent

and Seller are unable to resolve, despite good faith negotiations, all disputes reflected in the Cash Balance Objection Notice within thirty (30) days thereafter (the “Cash Balance Resolution Period”), then Parent and Seller will, within thirty (30) days after the expiration of the Cash Balance Resolution Period, submit any such unresolved dispute to an Independent Accounting Firm. Parent and Seller shall provide to the Independent Accounting Firm all supporting documentation relating to the unresolved disputes requested by the Independent Accounting Firm to the extent available to Parent or its Representatives or Seller or its Representatives. Parent and Seller shall be afforded the opportunity to present to the Independent Accounting Firm any material related to the unresolved disputes and to discuss the issues with the Independent Accounting Firm. The determination by the Independent Accounting Firm, as set forth in a notice to be delivered to Parent and Seller within thirty (30) days after the submission of the unresolved disputes to the Independent Accounting Firm, shall be final, binding and conclusive on the Parties. The fees and expenses of the Independent Accounting Firm shall be borne by Parent and Seller in inverse proportion as they may prevail on matters resolved by the Independent Accounting Firm, which proportionate allocations shall also be determined by the Independent Accounting Firm at the time the determination of the Independent Accounting Firm is rendered on the merits of the matters submitted. The Closing Cash Balance reflected in the Cash Balance Statement, as revised to reflect the resolution of any and all disputes by Parent and Seller and/or the Independent Accounting Firm, shall be deemed to be the Closing Cash Balance. The “Cash Balance Adjustment Amount” (which may be a positive or negative number) shall equal the amount determined by subtracting $1,000,000 from the Closing Cash Balance. Within five Business Days after the calculation of the Closing Cash Balance becomes binding and conclusive, if the Cash Balance Adjustment Amount is positive, Parent shall pay Seller the lesser of $150,000 and the Cash Balance Adjustment Amount via wire transfer of immediately available funds to the bank account designated by Seller. If the Cash Balance Adjustment Amount is negative, Seller shall surrender to Parent a number of shares (rounded to the nearest whole share) of Parent Common Stock equal to the Cash Balance Adjustment Amount divided by the Fair Market Value of each share of Parent Common Stock.’

4.4 New Section 3.3A of the Purchase Agreement. A new Section 3.3A shall be added to the Purchase Agreement immediately after Section 3.3 and immediately prior to Section 3.4 and shall read as follows:

(a) As soon as practicable (and in any event within forty (40) days following the Closing), Seller shall prepare and deliver to Parent and its counsel a statement (the “Effective Time Statement”) setting forth all of the cash received by the Business during the Interim Period (collectively, the “Effective Time Cash”) and all cash payments made by Seller or its Affiliates with respect to the Business during the Interim Period, including without limitation payments made with respect to obligations of the Buyer under Section 6.2(b) (collectively, the “Effective Time Payments”). The “Effective Time Adjustment Amount” (which may be a positive or negative number) shall equal the amount determined by subtracting the Effective Time Payments from the Effective Time Cash. Within five Business Days after the calculation of the Effective Time Statement becomes binding and conclusive (pursuant to Section 3.3A(b)), if the Effective Time Adjustment Amount is positive, Seller shall pay Parent such positive amount via wire

transfer of immediately available funds to the bank account designated by Parent. If the Effective Time Adjustment Amount is negative, Buyer shall pay Seller such amount via wire transfer of immediately available funds to the bank account designated by Seller.

(b) The costs and expenses of preparing the Effective Time Statement shall be borne 50% by Seller and 50% by Parent. The Effective Time Statement shall be conclusive and binding on the Parties unless Parent gives written notice of any objections thereto setting forth in reasonable detail the amounts in dispute and the basis for such disagreement (an “Effective Time Statement Objection Notice”) to Seller within thirty (30) days after its receipt of the Effective Time Statement and all supporting documentation relating thereto. If Seller delivers an Effective Time Statement Objection Notice as provided above, Parent and Seller shall attempt in good faith to resolve such dispute, and any resolution by them as to any disputed amounts shall be final, binding and conclusive. If Parent and Seller are unable to resolve, despite good faith negotiations, all disputes reflected in the Effective Time Statement Objection Notice within thirty (30) days thereafter (the “Effective Time Statement Resolution Period”), then Parent and Seller will, within thirty (30) days after the expiration of the Effective Time Statement Resolution Period, submit any such unresolved dispute to an Independent Accounting Firm. Parent and Seller shall provide to the Independent Accounting Firm all supporting documentation relating to the unresolved disputes requested by the Independent Accounting Firm to the extent available to Parent or its Representatives or Seller or its Representatives. Parent and Seller shall be afforded the opportunity to present to the Independent Accounting Firm any material related to the unresolved disputes and to discuss the issues with the Independent Accounting Firm. The determination by the Independent Accounting Firm, as set forth in a notice to be delivered to Parent and Seller within thirty (30) days after the submission of the unresolved disputes to the Independent Accounting Firm, shall be final, binding and conclusive on the Parties. The fees and expenses of the Independent Accounting Firm shall be borne by Parent and Seller in inverse proportion as they may prevail on matters resolved by the Independent Accounting Firm, which proportionate allocations shall also be determined by the Independent Accounting Firm at the time the determination of the Independent Accounting Firm is rendered on the merits of the matters submitted. The Closing Cash Balance reflected in the Cash Balance Statement, as revised to reflect the resolution of any and all disputes by Parent and Seller and/or the Independent Accounting Firm, shall be deemed to be the Closing Cash Balance.

(c) Calculations made under this Section 3.3A shall be separate and distinct from the calculations made under Section 3.2(d) and shall exclude payments made by Seller to Research in Motion Limited, as contemplated by that certain letter agreement dated as of even date herewith. Adjustments made under Section 3.2(d) and payments made pursuant to such letter agreement shall not be taken into account when making determinations under this Section 3.3A, and adjustments made under this Section 3.3A shall not be taken into account when making determinations under Section 3.2(d).’

(a) Clause (a) of Section 3.4 of the Purchase Agreement shall be amended and restated in its entirety as follows:

‘(a) certificates representing the Parent Common Stock Consideration (in such denominations as Seller shall reasonably request at least one Business Day prior to the Closing Date) duly executed on behalf of the Parent and registered in the name of Seller or its designee;’

(b) Clause (b) of Section 3.4 shall be amended and restated in its entirety as follows:

‘(f) the Registration Rights Agreement in substantially the form attached hereto as Exhibit N (the “Registration Rights Agreement”), duly executed by Parent; and

(g) the Note in substantially the form attached hereto as Exhibit O, duly executed by Parent.’

4.6 Amendments to Section 3.5 of the Purchase Agreement. Section 3.5 of the Purchase Agreement and shall be amended and restated in its entirety as follows:

‘Section 3.5 Deliveries by Seller. At the Closing, Seller shall deliver, or cause to be delivered by its Affiliates, to Buyer the following:

(b) the certificate by officers of Seller required to be delivered pursuant to Section 7.3(c);

(f) True, correct and complete copies of all required consents of Governmental Authorities set forth on Schedule 4.6, and all Required Consents;

(g) Certificates of good standing from the Secretary of the State of Delaware, dated as of a recent date, certifying that Seller is in good standing in the State of Delaware;

(h) Valid and effective assignment documentation, in form and substance reasonably acceptable to Buyer, of any rights to the Intellectual Property that are included in the Purchased Assets and the AAE Purchased Assets;

(i) Such documents as are required under Applicable Law to effect the resignation of Dave Reymann as a director of the Acquired Aether Entities;

(j) Such other documents and instruments as may be reasonably requested by Buyer to consummate the transactions contemplated herein and to carry out the obligations of the parties hereunder;

5.1 Amendments to Section 4.18 of the Purchase Agreement. Section 4.18 of the Purchase Agreement shall be amended and restated in its entirety and shall read as follows:

‘Section 4.18 Undisclosed Liabilities. Except as described on Schedule 4.18, there are no Liabilities of Seller or any of the Acquired Aether Entities that constitute Assumed Liabilities other than (a) Liabilities reflected on the September 30 Net Working Capital Statement, (b) Liabilities that have arisen since September 30, 2003, for trade or business obligations incurred in connection with the purchase of goods or services in the ordinary course of the Business and consistent with past practice, (c) obligations of continued performance under the Assigned Contracts and the Permits, (d) the line item “deferred revenue” as set forth on the September 30 Net Working Capital Statement and “deferred revenue” since September 30, 2003 booked in the ordinary course of the Business, consistent with past practices, (e) as of the Effective Time, Liabilities reflected on the Closing Net Working Capital Statement and (f) Liabilities that have arisen during the Interim Period. As of the Closing Date, all promissory notes issued by Aether Systems Limited have been duly and fully repaid or released. All loans made to Acquired Aether Entities by IFX Infoforex Deutschland GmbH have been duly and fully repaid or released.

5.2 Amendments to Section 4.22 of the Purchase Agreement. Section 4.22 of the Purchase Agreement shall be amended and restated in its entirety and shall read as follows:

‘Section 4.22 Filings with the SEC. None of the Public Reports, as of its filing date (except to the extent that a subsequent filing amended information previously filed), contained with respect to the Purchased Assets, the AAE Purchased Assets, the Assumed Liabilities, the Purchased Shares, the Acquired Aether Entities or the Business any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.’

5.3 Amendments to Section 4.29 of the Purchase Agreement. Section 4.29 of the Purchase Agreement shall be amended and restated in its entirety and shall read as follows:

‘Section 4.29 Investment. Seller (a) understands that the Parent Common Stock has not been registered under the Securities Act, or under any state securities laws, and is being issued to Seller in reliance upon federal and state exemptions for transactions not involving any public offering, (b) will hold the Parent Common Stock solely for its own account for investment purposes, and not with a view toward the distribution thereof, and (c) is an Accredited Investor.’

6.1 Amendments to Article V of the Purchase Agreement. Article V of the Purchase Agreement shall be amended and restated in its entirety as follows:

TSYS and TCS Ltd., jointly and severally, and Parent represent and warrant to the Seller as follows, except as set forth on the Buyer’s Disclosure Schedule (which is arranged in sections corresponding to the Sections contained in this Article V and as to which the disclosure in any section of the Buyer Disclosure Schedule qualifies only the corresponding Section, unless it is reasonably apparent that the disclosure in any section or subsection of the Buyer Disclosure Schedule should apply to one or more other Sections):

Section 5.1. Organization and Good Standing. Each of TSYS, TCS Ltd. and Parent is duly organized, validly existing and in good standing under the laws of the state or country of its incorporation and has all requisite power and authority to own, lease and operate its properties and to operate its business. Each of TSYS, TCS Ltd. and Parent is duly qualified in each jurisdiction in which the ownership of property or the conduct of its business requires such qualification, except where the failure to do so would not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of the TSYS, TCS Ltd. or Parent that adversely affects TSYS’s, TCS Ltd.’s or the Parent’s ability to consummate the transactions contemplated by this Agreement.

Section 5.2. Corporate Authorization. Each of TSYS, TCS Ltd. and Parent has full power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is a party, to perform its obligations under this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby on the terms set forth herein and therein. Each of this Agreement, the Deal License Agreement and the Transition Services Agreement has been duly executed and delivered by TSYS, TCS Ltd. and Parent and, assuming the due execution of such agreement by Seller, is a valid and binding obligation of TSYS, TCS Ltd. and Parent, enforceable against TSYS, TCS Ltd. and Parent in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, receivership and similar laws affecting the enforcement of creditors’ rights generally, and general equitable principles.

Section 5.3. No Breach. The execution, delivery and performance by TSYS, TCS Ltd. and Parent of this Agreement and the Ancillary Agreements to which it is a party, and the consummation by TSYS, TCS Ltd. and Parent of the transactions contemplated hereby and thereby, do not and will not (a) contravene or conflict with the Charter Documents of TSYS, TCS Ltd. or Parent or (b) violate any order, injunction, judgment, decree or award, federal, state, local or foreign law, ordinance, statute, rule or regulation to which TSYS, TCS Ltd. or Parent is subject or by which TSYS, TCS Ltd. or Parent or its properties may be bound, except where such violations, conflicts, breaches or defaults would not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of TSYS or TCS Ltd. that adversely affects TSYS’s, TCS Ltd.’s or Parent’s ability to consummate the transactions contemplated by this Agreement.

Section 5.4. Availability of Funds. Each of TSYS and TCS Ltd. has sufficient cash available to enable it to consummate the transactions contemplated by this Agreement and consistent with the provisions of this Agreement and to satisfy the Assumed Liabilities as they become due in the ordinary course of the Business.

Section 5.5. No Other Representations. Each of TSYS, TCS Ltd. and Parent acknowledge that Seller makes no representation or warranty with respect to (a) any projections, estimates or budgets delivered to or made available to TSYS, TCS Ltd. and Parent of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of the Business, the Acquired Aether Entities or the Purchased Assets or the future business and future operations thereof or (b) except for

Section 4.17(a), the CIM or any other information or documents made available to each of TSYS, TCS Ltd. and Parent or its counsel, accountants or advisors with respect to the Business, the Acquired Aether Entities or the Purchased Assets or the businesses or operations thereof.

Section 5.6. Broker’s Fees. Neither TSYS, TCS Ltd. nor Parent has any Liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement, except for Friedman, Billings & Ramsey, Inc., whose fees and expenses will be paid by Buyer.

Section 5.7. Private Financing. Parent, 033 Asset Management, LLC and The Riverview Group LLC have executed the term sheets attached to this Agreement as Exhibit I. Seller has received true and complete copies of the Completed Financing Agreements. The Completed Financing Agreements were duly authorized, executed and delivered by Parent and executed and delivered by the investors party thereto.

Section 5.8. SEC Documents. (a) Parent has filed all reports, schedules, forms, statements and other documents required to be filed by Parent with the SEC since January 1, 2003 (the “Parent SEC Documents”).

(b) As of its respective date, each Parent SEC Document complied in all material respects with the requirements of the Exchange Act or the Securities Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Parent SEC Document, and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent corrected or amended by subsequently filed Parent SEC Documents prior to the date of this Agreement. The consolidated financial statements of Buyer included in the Parent SEC Documents comply as to form in all material respects, as of their respective dates, with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Parent and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods shown (subject, in the case of unaudited statements, to normal year-end audit adjustments).

Section 5.9. Capitalization; Issuance of Securities. The Parent Common Stock to be delivered to Seller at the Closing shall have been duly authorized and, upon issuance in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. As of December 18, 2003, Buyer’s authorized capital stock consists solely of 225,000,000 shares of Class A Common Stock, $0.01 par value per share, of which 21,900,732 shares are issued and outstanding as of the date hereof, and 75,000,000 shares of Class B Common Stock, par value $0.01 per share, of which 9,507,988 shares are issued and outstanding as of the date hereof. Except as set forth on Schedule 5.9, there are no outstanding (a) securities convertible into or exchangeable for capital stock of Parent; (b) options, warrants or other rights

to purchase or subscribe capital stock of Parent other than employee stock options granted by Parent; or (c) contracts, commitments, agreements, understandings or arrangements of any kind relating to the issuance of any capital stock of Parent, any such convertible or exchangeable securities or any such options, warrants or rights. The issuance of the Parent Common Stock to Seller is exempt from registration under the Securities Act of 1933.

Section 5.10 Claims and Proceedings. Except as set forth on Schedule 5.10, (i) there is no outstanding order of any Governmental Authority against or involving TSYS, TCS Ltd. or Parent any subsidiary of Parent or any of their respective Affiliates that could defeat, defer or negatively impact the consummation of the transactions contemplated by this Agreement, and (ii) there is no Claim pending, or, to the knowledge of TSYS, TCS Ltd. or Parent, threatened against TSYS, TCS Ltd. or Parent, involving this Agreement or the transactions contemplated hereby.

Section 5.11. Securities Act. The Purchased Shares purchased by TCS Ltd. pursuant to this Agreement are being acquired for investment only and not with a view to any public distribution thereof, and the TCS Ltd. shall not offer to sell or otherwise dispose of the Purchased Shares so acquired by it in violation of Applicable Law

Section 5.12 Absence of Certain Changes; No Material Adverse Effect. Since September 30, 2003 Parent’s business has been conducted in the ordinary course consistent with past practice and there has not been any event, occurrence or development which has had a material adverse effect on the business, operations or financial condition of Parent and its consolidated subsidiaries, taken as a whole.’

(a) A new paragraph shall be added immediately after clause (ix) of Section 6.1(b) and shall read as follows:

‘Notwithstanding the clause (iv) of this Section 6.1(b), Seller, Parent TSYS and TSYS Ltd. agree that management of the Acquired Aether Entities may proceed with consideration of, and if warranted after compliance with Applicable Law, notification of redundancy or other termination of up to three employees of the Acquired Aether Entities as may be selected by management of the Acquired Aether Entities in agreement with Seller, notwithstanding such employees being listed on Schedule 4.21(a) by Seller. All statutory and contractual severance payments to be made to such employees after the Closing in compliance with Applicable Law shall constitute Excluded Liabilities.’

(b) Section 6.1(f) of the Purchase Agreement shall be amended and restated in its entirety as follows:

‘(f) Confidentiality. Seller and its Affiliates will hold, and will use their reasonable best efforts to cause their respective Representatives to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of Applicable Law, all confidential documents and information concerning Buyer or any of its Affiliates (whether or not related specifically to the Business) that are furnished to Seller or its Affiliates, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Seller, (ii) in the public domain through no fault of Seller or (iii) later lawfully acquired by Seller from sources other than Buyer or any of its subsidiaries or any other Person not under a non-disclosure or confidentiality obligation in favor of Buyer or any of its subsidiaries; provided that Seller may disclose such information to its Representatives who need to know such information for purposes of participating in the evaluation, negotiation and/or execution of the transactions contemplated by this Agreement and the Ancillary Agreements so long as such Persons are informed by Seller of the confidential nature of such information and are directed by Seller to treat such information confidentially. Seller shall be responsible for any failure to treat such information confidentially by such Persons. If this Agreement is terminated, Seller and its Affiliates will, and will use their reasonable best efforts to cause their respective Representatives to, destroy or deliver to Buyer, upon request, all documents and other materials, and all copies thereof, obtained by Seller or its Affiliates or on their behalf from Buyer or any of its subsidiaries in connection with this Agreement that are subject to such confidence. Notwithstanding the foregoing, effective upon, and only upon, the Closing, Seller’s obligations under this Section 6.1(f) shall terminate with respect to the Purchased Assets, the AAE Purchased Assets, the Assumed Liabilities, the Purchased Shares and the Business.’

(c) A new Section 6.1(l) shall be added immediately after Section 6.1(m) of the Purchase Agreement and shall read as follows:

‘(l) As soon as practicable after the Closing Date, Seller shall deliver, or cause to be delivered by its Affiliates, to Buyer certified copies of extracts of the trade register of the Acquired Aether Entities, where applicable, dated as of the Closing.’

7.2 Amendments to Section 6.2 of the Purchase Agreement. Section 6.2 of the Purchase Agreement shall be amended and restated in its entirety as follows:

‘6.2 Covenant of Buyer and Parent. Each of TSYS and TCS Ltd., jointly and severally, and Parent covenants and agrees as follows:

(a) Confidentiality. TSYS, TCS Ltd. and Parent and their Affiliates will hold, and will use their reasonable best efforts to cause their respective Representatives to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning Seller or any of its Affiliates (whether or not related specifically to the Business) that are furnished to TSYS, TCS Ltd., Parent or any of their Affiliates, except to the extent that such information can be shown to

have been (i) previously known on a nonconfidential basis by TSYS, TCS Ltd. or Parent, (ii) in the public domain through no fault of TSYS, TCS Ltd. or Parent or (iii) later lawfully acquired by TSYS, TCS Ltd. or Parent from sources other than Seller or any of its subsidiaries or any other Person not under a non-disclosure or confidentiality obligation in favor of Seller or any of its subsidiaries; provided that TSYS, TCS Ltd. or Parent may disclose such information to their Representatives who need to know such information for purposes of participating in the evaluation, negotiation and/or execution of the transactions contemplated by this Agreement and the Ancillary Agreements so long as such Persons are informed by TSYS, TCS Ltd. or Parent of the confidential nature of such information and are directed by TSYS, TCS Ltd. or Parent to treat such information confidentially. TSYS, TCS Ltd. and Parent shall be jointly and severally responsible for any failure to treat such information confidentially by such Persons. If this Agreement is terminated, TSYS, TCS Ltd., Parent and their Affiliates will, and will use their reasonable best efforts to cause their respective Representatives to, destroy or deliver to Seller, upon request, all documents and other materials, and all copies thereof, obtained by TSYS, TCS Ltd., Parent or their Affiliates or on their behalf from Seller or any of its subsidiaries in connection with this Agreement that are subject to such confidence. Notwithstanding the foregoing, effective upon, and only upon, the Closing, TSYS’s, TCS Ltd’s. or Parent’s obligations under this Section 6.2(a) shall terminate with respect to the Purchased Assets, the AAE Purchased Assets, the Purchased Shares, the Assumed Liabilities, the Excluded Liabilities and the Business.

(i) Effective as of the Closing Date, TSYS shall have offered employment to all Persons who are employees of the Business on the day immediately prior to the Closing Date and who are listed on Schedule 4.21(a) (including employees who are on an approved leave of absence, short-term disability leave or military leave, but not including any individual on long-term disability leave) with titles and job descriptions similar to those applicable to such employees immediately prior to the Closing Date. Employees who accept such offer of employment are referred to herein as “Transferred Employees.” Except as otherwise provided herein or in the Transition Services Agreement, effective as of the Closing Date the Transferred Employees will cease to participate in, or accrue any benefits under, Seller’s Employee Benefit Plans with respect to the Transferred Employees. In addition, any employee welfare benefit plan (as defined in Section 3(1) of ERISA) maintained by TSYS or Parent shall provide coverage for any pre-existing health condition of any Transferred Employee (and any eligible dependents or beneficiaries thereof), but only to the extent covered under an Employee Benefit Plan as in effect as of the date of this Agreement. Notwithstanding the foregoing, the Employees of the Acquired Aether Entities shall remain employees of the Acquired Aether Entities after the Closing.

(ii) Effective as of the Closing Date, TSYS will be responsible only for the obligations and associated Liabilities that arise pursuant to the continuation coverage requirements of COBRA as a result of “qualifying events,” as defined in COBRA, that occur with respect to Transferred Employees after the Closing Date.

(i) TSYS shall (x) replace all credit support arrangements provided by Seller or any of its Affiliates (excluding the Acquired Aether Entities), including any indemnity, guarantee, surety bond, letter of credit, cash or other collateral or escrow account in respect of the Business, the Purchased Assets or the Assumed Liabilities as set forth on Schedule 6.2(c) (the “Credit Support Agreements”); (y) release, or cause to be released, Seller and its Affiliates (excluding the Acquired Aether Entities) from any Liability or obligation to provide credit support in respect of the Business following the Closing; and (z) return, or cause to be returned, to Seller or its Affiliates (excluding the Acquired Aether Entities), as appropriate, all collateral that was provided by Seller or its Affiliates (excluding the Acquired Aether Entities) pursuant to a Credit Support Arrangement, in each case on or before the Closing.

(d) Financing. (i) Parent shall use its reasonable best efforts to complete the Private Financing (and receive the proceeds from such Private Financing) as promptly as practicable. Parent shall promptly notify Seller upon the funding of the Private Financing. If Parent is unable to complete the Private Financing by January 31, 2004, it shall promptly notify Seller of such fact (such notice, the “Substitute Financing Notice”).

(a) The lead-in to Section 6.3 of the Purchase Agreement shall be amended and restated in its entirety as follows:

‘Section 6.3. Mutual Covenants. TSYS and TCS Ltd., jointly and severally, Parent and Seller covenant and agree as follows:’

(b) Section 6.3(h) of the Purchase Agreement shall be amended and restated in its entirety as follows:

(i) Seller will be responsible for the preparation and filing of all Tax Returns for all periods ending on or prior to the Effective Time as to which Tax Returns are due after the Effective Time (including the consolidated, unitary, and combined Tax Returns for Seller which include the operations of the Business for any period ending on or before the Effective Time). Seller will make all payments required with respect to any such Tax Return; provided, however, that Buyer will indemnify Seller pursuant to Article IX for any such Taxes that are Assumed Liabilities. For the avoidance of doubt, this Section 6.3(h)(i) shall not apply to Aether European Holdings and other Acquired Aether Entities.

(ii) Buyer will be responsible for the preparation and filing of all Tax Returns for the Business for all periods ending after the Effective Time as to which Tax Returns are due after the Effective Time including Tax Returns for the Straddle Period. Buyer shall permit Seller to review and comment on each such Tax Return described in the preceding sentence prior to filing. Buyer will make all payments required with respect to any such Tax Return; provided, however, that Seller will indemnify the Buyer to the extent any payment the Buyer is making is a Tax attributable to a taxable period ending on or before the Effective Time based on the principles in Section 9.1(c), except to the extent that such Taxes are Assumed Liabilities. For the avoidance of doubt, this Section 6.3(h)(ii) shall not apply to Aether European Holdings and other Acquired Aether Entities:

(iii) With respect to Aether European Holdings and all other Acquired Aether Entities:

(A) Seller will be responsible for the preparation and filing of all Tax Returns for all periods ending on or prior to the Effective Time as to which Tax Returns are due after the Effective Time. Seller will make all payments required with respect to any such Tax Return.

(B) Buyer will be responsible for the preparation and filing of all Tax Returns for all periods ending after the Effective Time as to which Tax Returns are due after the Effective Time including Tax Returns for the Straddle Period. Buyer shall permit Seller to review and comment on each such Tax Return described in the preceding sentence prior to filing. Buyer will make all payments required with respect to any such Tax Return and Seller shall not be liable for any Taxes with respect to such Tax Returns, except as otherwise provided in Article IX.

(C) Except to the extent required by Applicable Laws, Buyer shall not permit Aether European Holdings and any other Acquired Aether Entity to take any action after the Effective Time which could increase the Seller’s Liability for Taxes (including any Liability of the Seller to indemnify the Buyer for Taxes pursuant to this Agreement).

charged with payment or indemnification responsibility under Article IX. Each Indemnifying Party shall promptly notify, and consult with, each Indemnified Party as to any action it proposes to take with respect to any Liability for Taxes for which it is required to indemnify the Indemnified Party. The Indemnified Party shall not enter into any closing agreement or final settlement with any Governmental Authority with respect to any such Tax Liability without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld. In the case of any proceedings relating to any Straddle Period, the Parties shall jointly control such proceedings and shall cooperate with each other as to the conduct of such proceedings. Each Party shall, at the expense of the requesting Party, execute or cause to be executed any powers of attorney or other documents reasonably requested by such requesting Party to enable it to take any and all actions such Party reasonably requests with respect to any proceedings which the requesting Party controls. The failure by a Party to provide timely notice under this subsection shall relieve the other Party from its indemnification obligations with respect to the subject matter of any notification not timely forwarded, to the extent the other Party has suffered a loss or other economic detriment because of such failure to provide notification in a timely fashion.’

‘(j) Post Closing Accounts Receivable. After the Closing Date and continuing for a period of eighteen (18) months thereafter, Buyer shall in accordance with commercially reasonable business practices that are not materially less diligent than those used by the Parent with respect to its own business operations, attempt to collect (and shall cause the Aether Acquired Entities to attempt to collect) the Accounts Receivable existing at the Effective Time (“Effective Time Accounts Receivables”). In determining the collectability of Effective Time Accounts Receivable, the Parties agree that all amounts collected after the Effective Time shall be applied to the oldest accounts first, unless an account debtor specifies that any one or more of the payments made by such account debtor is being made with respect to a particular outstanding Account Receivable of such account debtor, in which case such payment shall be applied as such account debtor so specifies. To the extent that Buyer receives payment from Seller under Article VIII in respect of any uncollected Effective Time Accounts Receivable (each such Account Receivable, a “Reimbursed Receivable”), Buyer shall transfer to Seller all remaining records pertaining to such Reimbursed Receivable and Seller shall thereafter be entitled to collect such Reimbursed Receivable for its own account. If after payment by Seller, any Reimbursed Receivable is collected by or on behalf of Buyer (including by any of the Aether Acquired Entities), Buyer shall promptly pay (or cause to be paid) over to Seller the amount collected.’

7.4 New Section 6.4 of the Purchase Agreement. A new Section 6.4 shall be added to the Purchase Agreement immediately after Section 6.3 and shall read as follows:

‘Section 6.4 Mandatory Registration. Parent shall cause the registration of the Parent Common Stock in accordance with the terms of the Registration Rights Agreement.’

8.1 Amendments to Section 7.2 of the Purchase Agreement. A new clause (f) shall be added immediately after clause (e) of the Section 7.2 and shall read as follows:

‘(f) The Parent shall have executed and delivered to Seller the Registration Rights Agreement.’

9.1 Amendments to Section 8.1 of the Purchase Agreement. Section 8.1 of the Purchase Agreement shall be amended and restated in its entirety to read as follows:

‘(a) the representations and warranties contained in Section 4.1, Section 4.2, Section 4.3, Section 4.4, Section 4.8, Section 4.23, Section 4.25(a) (but excluding clause (ii) thereof), Section 4.25(b), Section 4.25(c), Section 5.1, Section 5.2, Section 5.5, Section 5.6, Section 5.9 and Section 5.11, shall survive the Closing without time limit,’

9.2 Amendments to Section 8.2 of the Purchase Agreement. Section 8.2(e) of the Purchase Agreement shall be amended and restated in its entirety to read as follows:

‘Seller’s, the Acquired Aether Entities’ or their respective Affiliates’ ownership, operation or use of the Purchased Assets, the Purchased Shares, the Business, or the AAE Purchased Assets prior to the Effective Time, other than the Assumed Liabilities, except to the extent such Losses relating thereto relate to or result from, directly or indirectly, a breach of any representation or warranty of Seller in this Agreement;’

9.3 Amendments to Section 8.3 of the Purchase Agreement. Sections 8.3(c) and (d) of the Purchase Agreement shall be amended and restated in their entireties to read as follows:

‘(c) the Assumed Liabilities, including Buyer’s (and, during the Interim Period, the Acquired Aether Entities’) failure to satisfy any of its obligations relating thereto, except to the extent such Losses relate to or result from, directly or indirectly, a breach of any representation or warranty of Seller in this Agreement; and

(d) the ownership, operation or use of the Purchased Assets, the Acquired Aether Entities, the Purchased Shares, the AAE Purchased Assets and the Business during the Interim Period (which do not include the Excluded Liabilities) by Seller (and its Affiliates, including the Acquired Aether Entities), except to the extent any action or omission breaches the covenants of Seller included in Section 6.1 of this Agreement, and from and after the Closing by Buyer and the Acquired Aether Entities; and’

9.4 Amendment to Section 8.7 of the Purchase Agreement. Section 8.7 of the Purchase Agreement shall be amended and restated in its entirety to read as follows:

‘Subject to the last sentence of this Section 8.7, Seller shall not be required to indemnify Buyer Indemnitees, and shall not have any Liability under Section 8.2(a), until the aggregate amount of all Losses under Section 8.2(a) exceeds $200,000 (the “Minimum Loss”), and then only to the extent such aggregate Losses exceed the Minimum Loss. Subject to the following sentence, the aggregate amount of each of Seller’s liability for Losses under Section 8.2(a) and Buyer’s and Parent’s aggregate liability for Losses under Section 8.2(b) shall be limited in each case to an amount equal to 40% of the Purchase Price. The limitations set forth in this Section 8.7 will not apply to any Claims for indemnification in connection with, arising out of, or which would not have occurred but for:

Notwithstanding the foregoing or anything to the contrary set forth herein, the aggregate amount of Seller’s liability shall be limited to an amount equal to the Purchase Price in respect of all Claims for indemnification in connection with, arising out of, or which would not have occurred but for, a breach of the representations and warranties contained in Section 4.4, Section 4.13 and Section 4.15; and (ii) the amount of Seller’s liability for a breach of the representations and warranties contained in Section 4.19 shall be limited to, and determined by, a recalculation of the Closing Working Capital and the Adjustment Amount as if such Losses existed on the day immediately preceding the Effective Time (giving effect to any and all prior payments made pursuant to Section 3.2(d) in connection with the Purchase Price adjustment and any and all prior payments made pursuant to this clause (ii)), and no Losses shall be recoverable until and unless the aggregate amount of such Losses (for which no indemnification has been made and no adjustment was made in connection with the Purchase Price adjustment pursuant to Section 3.2(d)) exceeds on a cumulative basis the Adjustment Floor (as increased or reduced by any payment made in connection with the Purchase Price adjustment pursuant to Section 3.2(d) and the aggregate amount of all prior payments made pursuant to this clause (ii)), and then Seller’s indemnification liability shall only be the amount of the excess of such Losses over the Adjustment Floor (as adjusted as described above). It is understood and agreed that the purpose of the foregoing clause (ii) is to treat any Losses resulting from a breach of the representations and warranties contained in Section 4.19 as if such Losses existed on the Effective Time and were included in the calculation of the Closing Working Capital in determining the Adjustment Amount and any required payments under Section 3.2(d), and to require any payments that

would have been required to be made in connection with the Purchase Price adjustment under Section 3.2(d) if such Losses existed on day immediately preceding the Effective Time (and such payments hereunder shall equal, and in no event exceed, the amount that would have been required to be paid under Section 3.2(d) in connection with the Purchase Price adjustment if such Losses existed on the day immediately preceding the Effective Time).’

10.1 Amendments to Section 9.1 of the Purchase Agreement. Section 9.1 of the Purchase Agreement shall be amended and restated in its entirety to read as follows:

‘(a) Buyer shall be liable for, and shall indemnify Seller Indemnitees against, all Taxes arising or resulting from (i) the conduct of the Business or the ownership of the Purchased Assets for taxable periods or portions thereof beginning after the Effective Time or (ii) any transaction relating to the Business or the Purchased Assets that Buyer or any of its Affiliates causes to occur on or after the Effective Time (excluding, subject to Section 3.7, the sale of the Business and the Purchased Assets to Buyer and the assumption of the Assumed Liabilities by Buyer pursuant to this Agreement).

(b) Seller shall be liable for and agrees to indemnify, defend and hold Buyer Indemnitees harmless from (i) any Tax imposed on any Acquired Aether Entity if and to the extent that such Tax arises in respect of a taxable period ended on or before the Effective Time (a “Tax Indemnity Period”), (ii) any Tax that constitutes a lien or Encumbrance on the Purchased Assets if and to the extent that such Tax arises in respect of a Tax Indemnity Period, (iii) any Tax or other Losses resulting from the inaccuracy or breach of any representation or warranty set forth in Section 4.14 or the breach of any covenants set forth in Section 6.3(h), and (iv) any costs and expenses (including, without limitation, reasonable expenses of investigation and attorneys’ fees and expenses) arising out of the imposition or assessment of any Tax, Losses or other costs described in clause (i), (ii) or (iii) (“Other Costs”), and the filing of any Returns for a taxable period ending on or before the Effective Time, including those incurred in the contest of good faith of any such imposition, assessment or assertion. Any Tax imposed as a result of the sale of the Business and the Purchased Assets to Buyer and the assumption of the Assumed Liabilities by Buyer pursuant to this Agreement shall be deemed to arise in respect of a Tax Indemnity Period.

(c) For purposes of subsections (a) and (b) of this Section 9.1, whenever it is necessary to determine the Liability for Taxes for a Straddle Period, such Taxes shall be apportioned between Seller and Buyer (A) in the case of Taxes other than income, sales and use and withholding taxes, on a per diem basis and (B) in the case of income, sales and use and withholding taxes, as determined as though the Straddle Period consisted of two taxable years or periods, one which ended on the Effective Time and the other which began at the beginning of the day following the Effective Time.

(d) Buyer shall pay to Seller the amounts received by Buyer or any of its Affiliates of any refund, abatement or credit of (A) Taxes which are attributable to the conduct of the Business or the ownership of the Purchased Assets on or prior to the Effective Time and (B) any other Tax Assets. In the case of any Straddle Period, Buyer shall pay to Seller the amount received by Buyer or any of its Affiliates of any refund, abatement or credit of Taxes that would have been made had the Taxable Period ended on the Effective Time.

11.1 Amendments to Section 10.1 of the Purchase Agreement. Section 10.1 of the Purchase Agreement shall be amended and restated in its entirety as follows:

(a) For a period of five (5) years after the Effective Time, in the event and for so long as any Party or any Acquired Aether Entity or any of their respective Affiliates is contesting or defending against any Claim in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Effective Time involving any Party or any Acquired Aether Entity or any of their respective Affiliates, the other Party or Acquired Aether Entity, as the case may be, will cooperate with the contesting or defending party and its counsel in the contest or defense, make available its personnel, and provide such testimony and access to its Books and Records as shall be reasonably necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending party (unless the contesting or defending party claims to be entitled to indemnification therefor under Article VIII or Article IX).

(b) For a period of five (5) years after the Effective Time, each Party shall provide such assistance as the other Party may from time to time reasonably request in connection with the preparation of Tax Returns required to be filed, any audit or other examination by any taxing authority, any judicial or administrative proceeding relating to Liability for Taxes, or any claim for refund in respect of such Taxes or in connection with any litigation and proceedings related to the Business, including making available documents,

witnesses, employees for interviews, litigation preparation and testimony. The requesting party shall reimburse the assisting party for the out-of-pocket costs incurred by the assisting party.’

11.2 Amendments to Section 10.2 of the Purchase Agreement: Section 10.2 of the Purchase Agreement shall be deleted in its entirety.

12.1 Amendments to Section 12.1 of the Purchase Agreement. Section 12.1 of the Purchase Agreement shall be amended and restated in its entirety as follows:

‘Section 12.1. Further Assurances. From time to time, at Parent’s, Buyer’s or Seller’s request, whether before or after the Closing Date, Parent, Buyer or Seller, as the case may be, shall, and shall cause their respective Affiliates and Representatives to, execute and deliver such further instruments of conveyance, transfer and assignment, cooperate and assist in providing information for making and completing regulatory filings prior to or after the Closing, and take such other actions as Parent, Buyer or Seller, as the case may be, may reasonably require of the other Party to more effectively assign, convey and transfer to such Party the Purchased Assets, the Acquired Aether Entities and the Purchased Shares, and to assume the Assumed Liabilities and the AAE Assumed Liabilities, as contemplated by this Agreement.’

12.2 Amendments to Section 12.5 of the Purchase Agreement. Section 12.5 of the Purchase Agreement shall be amended and restated in its entirety as follows:

‘Section 12.5. Construction. The term “Buyer” as used in this Agreement shall be construed, as the context requires, to refer to either or both of TSYS and TCS Ltd.’

12.3 New Sections 12.15, 12.16 and 12.17 of the Purchase Agreement. New Sections 12.15, 12.16 and 12.17 shall be added to Article XII of the Purchase Agreement immediately after Section 12.14 and shall read as follows:

‘Section 12.15. Consent to Capital Contribution. Parent and Buyer consent to the contribution by Aether Systems Limited of all of the issued share capital of Aether Management Services Limited to Aether Systems (UK) Limited prior to Closing, with such contribution resulting in Aether Management Systems Limited becoming a wholly-owned subsidiary of Aether Systems Limited.

Section 12.16. Liquidation Acknowledgement. The Parties acknowledge that Beyerholm & Moe ApS and Sila Communications Scandinavia ApS are in liquidation in Denmark and that such liquidation is expected to be completed after receipt by one or both of such companies of a refund from the Danish and/or other European national tax authorities. For purposes of this Agreement, the Parties agree that any amounts received from such tax refunds shall be first offset against any outstanding liabilities of the liquidating company, but that pursuant to this Agreement (including, without limitation, Articles II and IX), any remaining

amounts resulting from such tax refunds shall be for the account of Seller and paid by Parent or one of its Affiliates, net of any costs, expenses or Liabilities incurred by Parent or any of its Affiliates in connection with the Retained Cash, to Seller within 20 days of receipt thereof.

Section 12.17. Deemed Closing. The Parties acknowledge and agree that the transactions contemplated hereby are intended to have financial, economic and accounting effect as if the transactions contemplated by this Agreement had closed at the Effective Time as described in Section 3.1(b). To the extent that any provisions hereof are inconsistent with such intention, the provisions hereof shall be interpreted in a manner that gives effect to the Parties’ intentions and the Parties agree to cooperate in effectuating such intent.’

Through its execution of this Amendment, each of the parties hereby acknowledges and agrees that TCS Ltd. is made a party to the Purchase Agreement, in its entirety and as amended by this Amendment. Except as expressly provided in this Amendment, the Purchase Agreement shall continue in full force and effect.

The Parties agree and consent to any amendment to the Seller’s Disclosure Schedules (including, but not limited to, Schedule 6.1(h) thereto) to reflect the conveyance, purchase, assignment and transfer of cash held in the bank accounts of the Aether Acquired Entities in exchange for the Parent Common Stock Consideration, as such Parent Common Stock Consideration may be adjusted pursuant to the provisions described in Section 4.2 of this Amendment.

Each of the parties hereto agrees that all previous and future references to the Purchase Agreement shall be deemed to refer to such agreements as amended by the terms of this Amendment.

This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

The parties have participated jointly in the negotiation and drafting of this Amendment. In the event an ambiguity or question of intent or interpretation arises, this Amendment shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any provision of this Amendment.

This Amendment shall be governed by and construed under and the rights of the parties determined in accordance with the laws of the State of Maryland (without reference to the choice of law provisions of such state) except with respect to matters of law concerning the internal corporate affairs of any corporate entity which is a party to or the subject of this Amendment, and as to those matters the law of the jurisdiction under which the respective entity derives its powers shall govern.

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement on the date first written above.

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY ONLY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (C) RULE 144(K) UNDER SAID ACT AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS DEBENTURE SHOULD CAREFULLY REVIEW THE TERMS OF THIS DEBENTURE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS DEBENTURE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS DEBENTURE.

FOR VALUE RECEIVED, TeleCommunication Systems, Inc., a Maryland corporation (the “Company”), hereby promises to pay to the order of THE RIVERVIEW GROUP LLC or registered assigns (“Holder”) the amount set out above as the Principal (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) in the manner set forth herein on any outstanding Principal at the rate of 3.00% per annum, subject to periodic adjustment pursuant to Section 2 (the “Interest Rate”), from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon an Interest Date (as defined below), the Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Subordinated Convertible Debenture (including all Subordinated Convertible Debentures issued in exchange, transfer or replacement hereof, this “Debenture”) is one of an issue of Subordinated Convertible Debentures (collectively, the “Debentures” and such other Subordinated Convertible Debentures, the “Other Debentures”) issued on the Issuance Date pursuant to the Securities Purchase Agreement (as defined below). Certain capitalized terms are defined in Section 28.

Debenture to the Company and the Company shall pay to the Holder an amount in cash or, at the option of the Company (subject to the satisfaction of the conditions set forth in this Section 1), in shares of Common Stock (“Repayment Shares”), or a combination of cash and Repayment Shares, representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges, if any; provided that the Principal, accrued and unpaid Interest and accrued and unpaid Late Charges, if any payable on the Maturity Date may be payable in Repayment Shares (subject to the proviso set forth below) only if the Company delivers written notice of such election (“Maturity Date Payment Election Notice”) to each holder of the Debentures at least 15 Trading Days prior to the Maturity Date (a “Maturity Payment Election Date”). The “Original Maturity Date” shall be January 13, 2009, as extended at the option of the Holder (i) in the event that, and for so long as, an Event of Default (as defined in Section 4(a)) shall have occurred and be continuing or any event shall have occurred and be continuing which with the passage of time and the failure to cure would result in an Event of Default and (ii) through the date that is ten days after the consummation of a Change of Control (as defined in Section 5(a)) in the event that a Change of Control is publicly announced or a Change of Control Notice (as defined in Section 5(a)) is delivered prior to the Maturity Date (as such Original Maturity Date may be extended pursuant to clause (i) or (ii) above, the “Maturity Date”). Payments to be made on the Maturity Date in Repayment Shares shall be paid in a number of fully paid and nonassessable shares (rounded to the nearest whole share in accordance with Section 3(a)) of Common Stock equal to the quotient of (a) the Principal, accrued and unpaid Interest and accrued and unpaid Late Charges, if any, payable and (b) the Maturity Date Conversion Price on the Maturity Date. If any Repayment Shares are to be paid on the Maturity Date, then the Company shall (X) provided that the Company’s transfer agent (the “Transfer Agent”) is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of Repayment Shares to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver on the Maturity Date, to such address as specified at least two Business Days prior to the Maturity Date by the Holder in writing to the Company, a certificate, registered in the name of the Holder or its designee, for the number of Repayment Shares to which the Holder shall be entitled. Notwithstanding the foregoing, the Company shall not be entitled to make any payment due on the Maturity Date in Repayment Shares and shall be required to make all of such payment in cash on the Maturity Date if, unless consented to in writing by the Holder, (x) any event constituting an Event of Default or an event that with the passage of time and assuming it were not cured would constitute an Event of Default has occurred and is continuing on the applicable Maturity Payment Election Date or the Maturity Date, (y) (i) the Registration Statement (as defined in the Registration Rights Agreement) covering the Repayment Shares is not effective and available for the resale of all of the Registrable Securities (as defined in the Registration Rights Agreement) relating to this Debenture on the Maturity Payment Election Date or on the Maturity Date and (ii)

the Holder is not able to sell all of the Registrable Securities held by them pursuant to Rule 144(k) or (z) the Company has not obtained the Stockholder Approval (as defined in the Securities Purchase Agreement). The Company shall pay any and all taxes (other than income taxes which shall be payable by the Holder) that may be payable with respect to the issuance and delivery of Repayment Shares. If the Company elects to pay the amounts due on the Maturity Date by a combination of cash and Repayment Shares, then any conversions made by the holder prior to the Maturity Date shall be applied first to the amount of Repayment Shares which the Company has elected to pay and then against the amount to be paid by cash under the Maturity Date Payment Election Notice.

(2) INTEREST; INTEREST RATE. Interest on this Debenture shall commence accruing on the Issuance Date and shall be computed on the basis of a 365-day year and actual days elapsed and shall be payable in arrears on the first day of each Semi-Annual Period during the period beginning on the Issuance Date and ending on, and including, the Maturity Date (each, an “Interest Date”) with the first Interest Date being July 1, 2004. Interest shall be payable on each Interest Date, at the option of the Company, (i) in cash, (ii) by way of inclusion in the Conversion Amount in accordance with Section 3(b)(i), or (iii) subject to the satisfaction of the conditions set forth in this Section 2, in shares of Common Stock (“Interest Shares”); provided, that the Interest which accrued during any period shall be payable in Interest Shares only if the Company delivers written notice of such election (“Interest Election Notice”) to each holder of the Debentures at least ten (10) Trading Days prior to the Interest Date (an “Interest Election Date”). Interest to be paid on an Interest Date in Interest Shares shall be paid in a number of fully paid and nonassessable shares (rounded to the nearest whole share in accordance with Section 3(a)) of Common Stock equal to the quotient of (a) the Interest payable on such debt and (b) the Interest Conversion Price on the applicable Interest Date. If any Interest Shares are to be paid on an Interest Date, then the Company shall (X) provided that the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, credit such aggregate number of Interest Shares to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver on the applicable Interest Date, to such address as specified at least two Business Days prior to the applicable Interest Date by the Holder in writing to the Company, a certificate, registered in the name of the Holder or its designee, for the number of Interest Shares to which the Holder shall be entitled. Notwithstanding the foregoing, the Company shall not be entitled to pay Interest in Interest Shares and shall be required to pay such Interest in cash on the applicable Interest Date if, unless consented to in writing by the Holder, (x) any event constituting an Event of Default or an event that with the passage of time and assuming it were not cured would constitute an Event of Default has occurred and is continuing on the applicable Interest Election Date or the Interest Date, (y) (i) the Registration Statement (as defined in the Registration Rights Agreement) covering the Interest Shares is not effective and available for the resale of all of the Registrable Securities (as defined in the Registration Rights Agreement) relating to this Debenture on the Interest Election Date or on the Interest Date and (ii) the Holder

is not able to sell all of the Registrable Securities held by them pursuant to Rule 144(k) or (z) the Company has not obtained the Stockholder Approval. Prior to the payment of Interest on an Interest Date, Interest on this Debenture shall accrue at the Interest Rate and be payable by way of inclusion of the Interest in the Conversion Amount in accordance with Section 3(b)(i). From and after the occurrence of an Event of Default, the Interest Rate shall be increased to 12%. In the event that such Event of Default is subsequently cured or waived, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure or waiver; provided that the Interest as calculated at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure and waiver of such Event of Default. The Company shall pay any and all taxes (other than income taxes which shall be payable by the Holder) that may be payable with respect to the issuance and delivery of Interest Shares.

(3) CONVERSION OF DEBENTURES. This Debenture shall be convertible into shares of the Company’s Class A common stock, par value $0.01 per share (the “Common Stock”), on the terms and conditions set forth in this Section 3.

(a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.

(b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (as defined below) (the “Conversion Rate”).

		(i) “Conversion Amount” means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect to such Principal and Interest.

		(ii) “Conversion Price” means, as of any Conversion Date (as defined below) or other date of determination, and subject to adjustment as provided herein, $5.3753

		(i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 9:30 a.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company and (B) if required by Section 3(c)(iii), surrender this Debenture to a common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Debenture in the case of its loss, theft or destruction). On or before the first Business Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Transfer Agent (a “Confirmation Receipt”). On or before the third Business Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall (X) credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled. If this Debenture is physically surrendered for conversion as required by Section 3(c)(iii) and the outstanding Principal of this Debenture at the time of such conversion is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three Business Days after receipt of this Debenture and at its own expense, issue and deliver to the holder a new Debenture (in accordance with Section 18(d)) representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Debenture shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. All Conversion Amounts converted by the Holder after the Mandatory Conversion Notice Date shall reduce the Conversion Amount of this Debenture required to be converted on the Mandatory Conversion Date.

		(ii) Company’s Failure to Timely Convert. Subject to Section 3(d), if the Company shall fail to issue a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon conversion of any Conversion Amount on or prior to the date which is five Business Days after the Conversion Date, provided, that if the Company shall not have timely delivered a Confirmation Receipt, the Holder shall have retransmitted by facsimile its Conversion Notice on or prior to the date which is three Business Days after the Conversion Date (a “Conversion Failure”), then (A) the Company shall pay damages to the Holder for each date of such Conversion Failure in an amount equal to 1.0% of the product of (I) the sum of the number of shares of Common Stock not issued to the Holder

		on or prior to the Share Delivery Date and to which the Holder is entitled, and (II) the Weighted Average Price of the Common Stock on the Share Delivery Date and (B) the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned, as the case may be, any portion of this Debenture that has not been converted pursuant to such Conversion Notice; provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 3(c)(ii) or otherwise.

		(iii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion, redemption or repayment of any portion of this Debenture in accordance with the terms hereof, the Holder shall not be required to physically surrender this Debenture to the Company unless (A) the full Conversion Amount represented by this Debenture is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting physical surrender and reissue of this Debenture. The Holder and the Company shall maintain records showing the Principal, Interest and Late Charges converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Debenture upon conversion.

		(iv) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of Debentures for the same Conversion Date and the Company can convert some, but not all, of such portions of the Debentures submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of Debentures electing to have Debentures converted on such date a pro rata amount of such holder’s portion of its Debentures submitted for conversion based on the principal amount of Debentures submitted for conversion on such date by such holder relative to the aggregate principal amount of all Debentures submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Debenture, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23, and failure to convert the amount in dispute shall not constitute a default during pendency of dispute.

(i) Beneficial Ownership. Notwithstanding anything to the contrary set forth in this Debenture, the Company shall not effect any conversion of this Debenture, and the Holder of this Debenture shall neither solicit the conversion nor have the right to convert any portion of this Debenture pursuant to Section 3, to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates) would beneficially own in excess of 9.99% of the number of shares of Common Stock outstanding

		immediately after giving effect to such conversion. For purposes of the foregoing sentence, such Holder (together with such Holder’s affiliates) shall be deemed to beneficially own of the shares of Common Stock issuable upon conversion of this Debenture with respect to which the determination of such sentence is being made, but shall not be deemed to beneficially own shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Debenture and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Debentures or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock, on any determination date, as reflected in (x) the Company’s Form 10-Q or Form 10-K most recently filed, (y) a more recent public announcement by the Company or (z) any other notice by the Company setting forth the number of shares of Common Stock outstanding provided pursuant to the next sentence. For any reason at any time, upon the written request of the Holder, the Company shall within two Business Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. Any Conversion Notice requesting a conversion that, after giving effect to such conversion, would result in a violation of this Section 3(d)(i) shall be null and void as to the portion of such Conversion Notice that would be in violation of this Section 3(d)(i) as if never delivered to the Company.

		(ii) Principal Market Regulation. Notwithstanding anything to the contrary set forth in this Debenture, the Company shall not be obligated to issue any shares of Common Stock upon conversion of this Debenture if the issuance of such shares of Common Stock (individually or together with all other shares of Common Stock issued or issuable now or in the future pursuant to (i) this Debentures, (ii) the other Debentures issued by the Company pursuant to the Securities Purchase Agreement, (iii) the Warrants issued pursuant to the Securities Purchase Agreement, or (iv) the Securities Purchase Agreement) would exceed that number of shares of Common Stock which the Company may issue upon conversion of this Debenture without triggering the stockholder approval requirements of Rule 4350(i) under the rules of the Principal Market (the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders as required by the applicable rules of the Principal Market and in accordance with applicable law for issuances of Common Stock

in excess the threshold amount in such rule or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Debentures representing at least a majority of the principal amounts of the Debentures then outstanding. Until such approval or written opinion is obtained, no purchaser of the Debentures, Warrants or shares of Common Stock pursuant to the Securities Purchase Agreement (the “Purchasers”) shall be issued, upon conversion of Debentures or exercise of the Warrants, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of Debentures initially issued to such Purchaser pursuant to the Securities Purchase Agreement and the denominator of which is the aggregate principal amount of all Debentures initially issued to the Purchasers pursuant to the Securities Purchase Agreement (with respect to each Purchaser, the “Exchange Cap Allocation”). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Debentures, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of Debentures shall convert all of such holder’s Debentures into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of Debentures on a pro rata basis in proportion to the aggregate principal amount of the Debentures then held by each such holder. Any Conversion Notice requesting a conversion that, after giving effect to such conversion, would result in a violation of this Section 3(d) shall be null and void as to the portion of such Conversion Notice that would be in violation of this Section 3(d) as if never delivered to the Company.

(a) Event of Default. Each of the following events shall constitute an “Event of Default”:

(i) the failure of the applicable Registration Statement required to be filed pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 60 days after the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement), or, while the applicable Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of the applicable Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Debentures for sale of all of such holder’s Registrable Securities (as defined

		in the Registration Rights Agreement) in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of more than an aggregate of 20 Trading Days in any 365-day period (other than days during an Allowable Grace Period (as defined in the Registration Rights Agreement));

		(ii) the suspension from trading or failure of the Common Stock to be listed on the Principal Market, The Nasdaq SmallCap Market or The New York Stock Exchange, Inc. for a period of 10 consecutive Trading Days or for more than an aggregate of 20 Trading Days in any 365-day period;

		(iii) the Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within ten (10) Business Days after the applicable Conversion Date or (B) written notice to any holder of the Debentures, including by way of public announcement or through any of its agents, at any time, of its express intention not to comply with a request for conversion of any Debentures into shares of Common Stock that is tendered in accordance with the provisions of the Debentures;

		(iv) at any time following the 20^th consecutive Business Day that the Holder’s Authorized Share Allocation is less than the number of shares of Common Stock that the Holder would be entitled to receive upon a conversion of the full Conversion Amount of this Debenture (without regard to any limitations on conversion set forth in Section 3(d)(i) or otherwise);

		(v) the Company’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Debenture or any other Transaction Document (as defined in the Securities Purchase Agreement), certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party, except, in the case of a failure to pay Interest and Late Charges when and as due, in which case only if such failure continues for a period of at least seven Business Days after the Company has received notice of such failure to pay from the Holder;

		(vi) any redemption of or acceleration prior to maturity of any material Indebtedness (as defined in Section 3(s) of the Securities Purchase Agreement) of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than with respect to any Other Debentures;

		(vii) the Company or any of its Subsidiaries, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a

		general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;

		(viii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries or (C) orders the liquidation of the Company or any of its Subsidiaries;

		(ix) a final non-appealable judgment or judgments for the payment of money aggregating in excess of $1,500,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within 60 days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a creditworthy party shall not be included in calculating the $1,500,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within 30 days of the issuance of such judgment;

		(x) the Company breaches, in any material respect, any representation, warranty, covenant or other term or condition of this Debenture or any other Transaction Document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of covenant which is curable, only if such breach continues for a period of at least ten (10) consecutive Business Days of the Company’s receipt of notice of same; or

		(xi) any breach or failure in any respect to comply with Section 14 of this Debenture.

(b) Redemption Right. Promptly after the Company becomes aware of the occurrence of an Event of Default with respect to this Debenture or any Other Debenture, the Company shall deliver written notice thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder. At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of this Debenture by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the facts constituting the Event of Default and the portion of this Debenture the Holder is electing to redeem. Each portion of this Debenture subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the product of (x) the Conversion Amount to be redeemed and (y) the Redemption Premium (the “Event of Default Redemption Price”). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 11.

(a) Change of Control. Each of the following events shall constitute a “Change of Control”:

		(i) the consolidation, merger or other business combination (including, without limitation, a reorganization or recapitalization) of the Company with or into another Person (other than (A) a consolidation, merger or other business combination (including, without limitation, reorganization or recapitalization) in which holders of the Company’s voting power immediately prior to the transaction continue after the transaction to hold, directly or indirectly, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities, or (B) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company);

		(ii) the sale or transfer of all or substantially all of the Company’s assets; or

		(iii) a purchase, tender or exchange offer made to and accepted by the holders of more than the 50% of the outstanding shares of Common Stock (exclusive of Repayment Shares and Interest Shares).

		No sooner than 15 days nor later than 10 days prior to the consummation of a Change of Control, but in any event not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a “Change of Control Notice”).

(b) Assumption. Prior to the consummation of any Change of Control, the Company will secure from any Person purchasing the Company’s assets or Common Stock or any successor (other than the Company) resulting from such Change of Control (in each case, an “Acquiring Entity”) a written agreement (in form and substance reasonably satisfactory to the holders of Debentures representing at least a majority of the aggregate principal amount of the Debentures then outstanding) to deliver to each holder of Debentures in exchange for such Debentures, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to the Debentures, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the Debentures then held by such holder, and reasonably satisfactory to the holders of Debentures representing at least a majority of the principal amount of the Debentures then outstanding. In the event that an Acquiring Entity is directly or indirectly controlled by a company or entity whose common stock or similar equity interest is listed, designated or quoted on a securities exchange or trading market, the holders of Debentures representing at least a majority of the aggregate principal amount of the Debentures then outstanding may elect to treat such Person as the Acquiring

(c) Redemption Right. At any time during the period beginning after the Holder’s receipt of a Change of Control Notice and ending on the date of the consummation of such Change of Control (or, in the event a Change of Control Notice is not delivered at least 10 days prior to a Change of Control, at any time on or after the date which is 10 days prior to a Change of Control and ending 10 days after the consummation of such Change of Control), the Holder may require the Company to redeem all or any portion of this Debenture by delivering written notice thereof (“Change of Control Redemption Notice”) to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Debenture subject to redemption pursuant to this Section 5(c) shall be redeemed by the Company at a price equal to the greater of (i) the product of (x) the Conversion Amount being redeemed and (y) the quotient determined by dividing (A) the Weighted Average Price of the Common Stock for the full Trading Day immediately following the public announcement of such proposed Change of Control by (B) the Conversion Price and (ii) 125% of the Conversion Amount being redeemed (the “Change of Control Redemption Price”). Redemptions required by this Section 5(c) shall be made in accordance with the provisions of Section 11 and shall have priority to payments to stockholders in connection with a Change of Control.

(a) Purchase Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Debenture (without taking into account any limitations or restrictions on the convertibility of this Debenture) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(b) Other Corporate Events. Prior to the consummation of any recapitalization, reorganization, consolidation, merger, spin-off or other business combination (other than a Change of Control) pursuant to which holders of Common Stock are entitled to receive securities or other assets with respect to or in exchange for Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Debenture, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had

such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Debenture initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the holders of Debentures representing at least a majority of the aggregate principal amount of the Debentures then outstanding.

(a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Issuance Date, the Company issues or sells, or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock issued or deemed to have been issued or sold by the Company in connection with any Excluded Security) for a consideration per share (the “New Securities Issuance Price”) less than a price (the “Applicable Price”) equal to the Conversion Price in effect immediately prior to such issue or sale (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the greater of (x) the New Securities Issuance Price and (y) $2.50 (subject to adjustment for any stock split, stock dividend, stock combination or other similar transaction after the Issuance Date) (the “Price Floor”). For purposes of determining the adjusted Conversion Price under this Section 7(a), the following shall be applicable:

(i) Issuance of Options. If the Company in any manner grants or sells any Options, other than Excluded Securities, and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then, solely for purposes of this Section 7, such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i), the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise of such Option” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion or exchange or exercise of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of

		such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion or exchange or exercise of such Convertible Securities.

		(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities, other than Excluded Securities, and the lowest price per share for which one share of Common Stock is issuable upon such conversion or exchange or exercise thereof is less than the Applicable Price, then, solely for purposes of this Section 7, such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the “price per share for which one share of Common Stock is issuable upon such conversion or exchange or exercise” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion or exchange or exercise of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange or exercise of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

		(iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable or exercisable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect to a Conversion Price greater than the Conversion Price in effect on the Issuance Date (subject to appropriate adjustments for stock splits, stock dividends, stock combinations and other similar transactions after the Issuance Date).

		(iv) Calculation of Consideration Received. In case any Option is issued in

		connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the gross amount received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Weighted Average Price of such securities on the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the holders of Debentures representing at least a majority of the principal amounts of the Debentures, unless the Board of Directors of the Company shall have obtained a fairness opinion from an independent financial advisor in which case the fair value shall be as stated in such fairness opinion. If, in the absence of a fairness opinion, such parties are unable to reach agreement within ten days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined in accordance with Section 23 hereof.

		(v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(b) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased.

(c) Other Events. If any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of Directors, in their reasonable discretion, will make an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder under this Debenture; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7.

(8) COMPANY’S RIGHT OF MANDATORY CONVERSION AND PREPAYMENT; HOLDER’S RIGHT TO REQUIRE REPAYMENT.

(a) (i) Mandatory Conversion. If at any time from and after January 13, 2006, the arithmetic average of the Weighted Average Price of the Common Stock exceeds 200% of the Conversion Price as of the Issuance Date (subject to adjustments pursuant to the terms and conditions of this Debenture) for each of any 30 consecutive Trading Days (the “Mandatory Conversion Measuring Period”) and the Conditions to Mandatory Conversion (as set forth in Section 8(c)) are satisfied or waived in writing by the Holder, the Company shall have the right to require the Holder to convert all or any such portion of the Conversion Amount of this Debenture designated in the Mandatory Conversion Notice into fully paid, validly issued and nonassessable shares of Common Stock in accordance with Section 3(c) hereof at the Conversion Rate as of the Mandatory Conversion Date (as defined below) (a “Mandatory Conversion”). The Company may exercise its right to require conversion under this Section 8(a) by delivering within not more than fifteen (15) Trading Days following the end of such Mandatory Conversion Measuring Period a written notice thereof by facsimile and overnight courier to all, but not less than all, of the holders of Debentures and the Transfer Agent (the “Mandatory Conversion Notice” and the date all of the holders received such notice is referred to as the “Mandatory Conversion Notice Date”). The Mandatory Conversion Notice shall be irrevocable.

(ii) Prepayment. Notwithstanding anything to the contrary contained in this Agreement, at any time after the Company has completed a Qualified Public Offering and as long as the Conditions to Optional Prepayment (as defined in Section 8(a)(iii) below) are satisfied or waived in writing by the Holder, the Company shall have the right to prepay all or any such portion of the outstanding Principal (the “Prepayment Portion”) for an amount in cash equal to 120% of the sum of the Prepayment Portion plus all accrued and unpaid Interest and accrued and unpaid Late Charges thereon, if any (such amount, the “Prepayment Premium Amount”). The Company may exercise its rights to prepay the Debenture as set forth hereunder by delivering written notice to the Holder at least twenty (20) Trading Days and no more than sixty (60) Trading Days prior to the effectiveness of such election indicating the date

of effectiveness of delivery of a written notice election (the “Prepayment Notice”), the Prepayment Portion, and the Prepayment Premium Amount (the date of effectiveness being referred to as the “Prepayment Effectiveness Date”). The Company shall deliver payment of the Prepayment Premium Amount on the applicable Prepayment Effectiveness Date by wire transfer of immediately available funds or by delivery of a certified check. A prepayment election hereunder shall be irrevocable unless waived by the Holder.

(iii) Conditions to Optional Prepayment. For purposes of this Section 8, “Conditions to Optional Prepayment” means the following conditions: (i) during the period commencing on the date of delivery of a Prepayment Notice under Section 8(a)(ii) above and the date of actual payment of the applicable Prepayment Premium Amount (such period, the “Optional Prepayment Period”), the Company shall have delivered shares of Common Stock upon any conversion of Conversion Amounts on a timely basis as set forth in Section 3(c)(i) and delivered shares of Common Stock upon exercise of any Warrants or on a timely basis as set forth in Section 1(a) of the Warrants; (ii) on each day during the Optional Prepayment Period, the Common Stock shall be listed on the Principal Market, The Nasdaq SmallCap Market or The New York Stock Exchange, Inc. and delisting or suspension by such market or exchange shall not have been threatened either (A) in writing by such market or exchange or (B) by falling below the minimum listing maintenance requirements of such market or exchange; (iii) during the Optional Prepayment Period, there shall not have occurred (x) the public announcement of a pending, proposed or intended Change of Control which has not been abandoned, terminated or consummated, or (y) an Event of Default; (iv) on each day of the Optional Prepayment Period either (x) the Registration Statement or Registration Statements required pursuant to the Registration Rights Agreement shall be effective and available for the sale for all of the Registrable Securities in accordance with the terms of the Registration Rights Agreement or (y) all shares of Common Stock issuable upon conversion of the Debentures and shares of Common Stock issuable upon exercise of the Warrants shall be eligible for sale without restriction and without the need for registration under any applicable federal or state securities laws; and (v) the Company otherwise shall have been in material compliance with and shall not have breached, in any material respect, any provision, covenant, representation or warranty of the Securities Purchase Agreement, the Registration Rights Agreement, the Warrants, any of the Debentures or any other Transaction Document (as defined in the Securities Purchase Agreement).

(b) Pro Rata Conversion/Prepayment Requirement. If the Company elects to cause a conversion of all or any portion of the Conversion Amount of this Debenture pursuant to Section 8(a)(i) or to prepay this Debenture in accordance with Section 8(a)(ii), then it must simultaneously take the same action with respect to the Other Debentures. If the Company elects to cause the conversion of this Debenture pursuant to Section 8(a) (or similar provisions under the Other Debentures), with respect to less than all of the Conversion Amounts of the Debentures then outstanding (or similar provisions under the Other Debentures) or elects to prepay less than all of the Conversion Amounts of the Debentures then outstanding in accordance with Section 8(a)(ii), then the Company shall require conversion of or prepay a

Conversion Amount from each of the holders of the Debentures equal to the product of (I) the aggregate Conversion Amount of Debentures which the Company has elected to cause to be converted pursuant to Section 8(a)(i) or to prepay pursuant to Section 8(a)(ii), multiplied by (II) the fraction, the numerator of which is the sum of the aggregate principal amount of the Debentures purchased by such holder pursuant to the Securities Purchase Agreement and the denominator of which is the sum of the aggregate principal amount of the Debentures then outstanding and purchased by all holders pursuant to the Securities Purchase Agreement (such fraction with respect to each holder is referred to as its “Allocation Percentage,” and such amount with respect to each holder is referred to as its “Pro Rata Amount”). In the event that the initial holder of any Debentures shall sell or otherwise transfer any of such holder’s Debentures, the transferee shall be allocated a pro rata portion of such holder’s Allocation Percentage. The Mandatory Conversion Notice shall state (i) the Trading Day selected for the Mandatory Conversion in accordance with Section 8(a), which Trading Day shall be at least 10 Business Days but not more than 60 Business Days following the Mandatory Conversion Notice Date (the “Mandatory Conversion Date”), (ii) the aggregate Conversion Amount of the Debentures which the Company has elected to be subject to mandatory conversion from all of the holders of the Debentures pursuant to this Section 8 (and analogous provisions under the Other Debentures), (iii) each holder’s Pro Rata Amount of the Conversion Amount of the Debentures the Company has elected to cause to be converted pursuant to this Section 8 (and analogous provisions under the Other Debentures) and (iv) the number of shares of Common Stock to be issued to such Holder as of the Mandatory Conversion Date. All Conversion Amounts converted by the Holder after the Mandatory Conversion Notice Date shall reduce the Conversion Amount of this Debenture required to be converted on the Mandatory Conversion Date or permitted to be prepaid on the Prepayment Effectiveness Date. If the Company has elected a Mandatory Conversion, the mechanics of conversion set forth in Section 3(c) shall apply, to the extent applicable, as if the Company and the Transfer Agent had received from the Holder on the Mandatory Conversion Date a Conversion Notice with respect to the Conversion Amount being converted pursuant to the Mandatory Conversion.

(c) Conditions to Mandatory Conversion. For purposes of this Section 8, “Conditions to Mandatory Conversion” means the following conditions: (i) during the Mandatory Conversion Measuring Period, the Company shall have delivered shares of Common Stock upon any conversion of Conversion Amounts on a timely basis as set forth in Section 3(c)(i) and delivered shares of Common Stock upon exercise of any Warrants or on a timely basis as set forth in Section 1(a) of the Warrants; (ii) on each day during the period beginning on the first Trading Day of the Mandatory Conversion Measuring Period and ending on and including the Mandatory Conversion Date, the Common Stock shall be listed on the Principal Market, The Nasdaq SmallCap Market or The New York Stock Exchange, Inc. and delisting or suspension by such market or exchange shall not have been threatened either (A) in writing by such market or exchange or (B) by falling below the minimum listing maintenance requirements of such market or exchange; (iii) during the Mandatory Conversion Measuring Period, there shall not have occurred (x) the public announcement of a pending, proposed or intended Change of

Control which has not been abandoned, terminated or consummated, or (y) an Event of Default; (iv) on each day of the period beginning on the date of delivery of the Mandatory Conversion Notice and ending on the Mandatory Conversion Date either (x) the Registration Statement or Registration Statements required pursuant to the Registration Rights Agreement shall be effective and available for the sale for all of the Registrable Securities in accordance with the terms of the Registration Rights Agreement or (y) all shares of Common Stock issuable upon conversion of the Debentures and shares of Common Stock issuable upon exercise of the Warrants shall be eligible for sale without restriction and without the need for registration under any applicable federal or state securities laws; (v) on each day of the period beginning on the Mandatory Conversion Date and ending thirty Trading Days thereafter either (x) the Registration Statements required pursuant to the Registration Rights Agreement shall be expected to be effective and available for the sale of at least all of the Registrable Securities in accordance with the terms of the Registration Rights Agreement or (y) all shares of Common Stock issuable upon conversion of the Debentures and shares of Common Stock issuable upon exercise of the Warrants shall be eligible for sale without restriction and without the need for registration under any applicable federal or state securities laws; and (vi) the Company otherwise shall have been in material compliance with and shall not have breached, in any material respect, any provision, covenant, representation or warranty of any Transaction Document.

(d) Holder’s Right to Require Redemption. If the Weighted Average Price of the Common Stock is less than the Conversion Price on either the ten consecutive Trading Days immediately preceding the second anniversary or third anniversary of the Issuance Date, the Holder shall have the right, in its sole discretion, to require that the Company redeem all or any portion of the Conversion Amount of this Debenture (a “Holder Optional Redemption”) by delivering written notice thereof (a “Holder Optional Redemption Notice”) to the Company within thirty days after the second anniversary or third anniversary of the Issuance Date, as applicable, which Holder Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Debenture subject to redemption pursuant to this Section 8(d) shall be redeemed by the Company in cash at a price equal to the Conversion Amount being redeemed (the “Holder Optional Redemption Price”). Redemptions required by this Section 8(d) shall be made in accordance with the provisions of Section 11.

(9) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Debenture, and will at all times in good faith carry out all of the provisions of this Debenture and take all action as may be required to reasonably protect the rights of the Holder of this Debenture.

(a) Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for each of the Debentures equal to 150% of the Conversion Rate with respect to the Conversion Amount of each such Debenture as of the Issuance Date. Thereafter, the Company, so long as any of the Debentures are outstanding, shall take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Debentures, 130% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Debentures then outstanding; provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence (the “Required Reserve Amount”). The initial number of shares of Common Stock reserved for conversions of the Debentures and each increase in the number of shares so reserved shall be allocated pro rata among the holders of the Debentures based on the principal amount of the Debentures held by each holder at the time of Issuance Date or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s Debentures, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Debentures shall be allocated to the remaining holders of Debentures, pro rata based on the principal amount of the Debentures then held by such holders.

(b) Insufficient Authorized Shares. If at any time while any of the Debentures remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Debentures at least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Debentures then outstanding. Without limiting the generality of the foregoing sentence, as soon as reasonably practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than 90 days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.

(a) Mechanics. In the event that the Holder has sent a Redemption Notice to the Company pursuant to Section 4(b) or Section 5(c), the Holder shall promptly submit this Debenture to the Company. The Company shall deliver the applicable Event of Default Redemption Price to the Holder within 10 Business Days after the Company’s receipt of

the Holder’s Event of Default Redemption Notice. If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5(c), the Company shall deliver the applicable Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five Business Days after the Company’s receipt of such notice otherwise. In the event that the Holder has sent a Holder Optional Redemption Notice pursuant to Section 8(d), the Company shall deliver the Holder Optional Redemption Price within 45 days after the Company’s receipt of the Holder Optional Redemption Notice and upon receipt of such payment, the Holder shall promptly deliver this Debenture to the Company. In the event of a redemption of less than all of the Conversion Amount of this Debenture, the Company shall promptly cause to be issued and delivered to the Holder a new Debenture (in accordance with Section 18(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the Redemption Price or Holder Optional Redemption to the Holder (or deliver any Common Stock to be issued pursuant to a Company Redemption Share Notice) within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price (and issues any Common Stock required pursuant to a Company Redemption Share Notice) in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Debenture representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price (or any Common Stock required to be issued pursuant to a Company Redemption Share Notice) (together with any Late Charges thereon) has not been paid. Upon the Company’s receipt of such notice, (x) the Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this Debenture, or issue a new Debenture (in accordance with Section 18(d)) to the Holder representing such Conversion Amount and (z) the Conversion Price of this Debenture or such new Debentures shall be adjusted to the lesser of (A) the Conversion Price as in effect on the date on which the Redemption Notice is voided and (B) the greater of (I) the Price Floor and (II) the Weighted Average Price, on the date on which the Redemption Notice is voided. The Holder’s delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company’s obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Conversion Amount subject to such notice.

(b) Redemption by Other Holders. Upon the Company’s receipt of notice from any of the holders of the Other Debentures for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) (each, an “Other Redemption Notice”), the Company shall immediately forward to the Holder by facsimile a copy of such notice. The Holder shall have five Business Days from receipt of such facsimile copy of such Other Redemption Notice to deliver a Redemption Notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices during such five Business Day period and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices,

then the Company shall redeem a pro rata amount from each holder of the Debentures (including the Holder) based on the principal amount of the Debentures submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such five Business Day period.

(12) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. Until all of the Debentures have been converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not, directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on its capital stock, other than the repurchase of restricted stock from terminated employees or the redemption of any shares of preferred stock or payment of dividends or redemptions required to be paid pursuant to the terms of any securities existing on the date hereof, without the prior express written consent of the holders of Debentures representing at least a majority of the aggregate principal amount of the Debentures then outstanding.

(13) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Debenture, except as required by law and as expressly provided in this Debenture.

(a) Rank. All payments due under this Debenture (a) shall rank pari passu with all Other Debentures and (b) shall be senior to all other Indebtedness of the Company and its Subsidiaries, other than Permitted Senior and Pari Passu Indebtedness (as defined below), except as otherwise provided in the last sentence of the definition of “Senior Debt” set forth in Section 28(b).

(b) Incurrence of Indebtedness. So long as this Debenture is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced by this Debenture and the Other Debentures and (ii) Permitted Indebtedness. As used herein, “Permitted Indebtedness” means (A) an aggregate amount of Indebtedness that is senior or pari passu in right of payment to the Debentures (collectively, “Permitted Senior and Pari Passu Indebtedness”) not to exceed at any one time $25,000,000 and (B) Permitted Subordinated Indebtedness. “Permitted Subordinated Indebtedness” means Indebtedness that (x) is made expressly subordinate in right of payment to the Indebtedness evidenced by this Debenture and the Other Debentures on terms reasonably satisfactory to the holders of Debentures representing not less than a majority of the aggregate principal amount of the then outstanding Debentures and (y) does not provide at any time for the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon until at least 91 days after the Maturity Date.

(c) Existence of Liens. So long as this Debenture is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens. As used herein, “Permitted Liens” means (i) Liens incurred to secure Permitted Senior and Pari Passu Indebtedness, (ii) statutory Liens for current taxes not yet due, (iii) purchase money Liens on equipment or other property acquired or held by the Company or any of its Subsidiaries in the ordinary course of its business to secure the purchase price of such equipment or Indebtedness incurred solely for the purpose of financing the acquisition of such equipment or Liens existing on such equipment at the time of its acquisition; provided, however, that no such Lien shall extend to or cover any other property of the Company or any of its Subsidiaries; and (iv) other Liens imposed by law (such a materialmen’s, mechanics’, carriers’, worker’s and repairman’s Liens).

(d) Restricted Payments. The Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Permitted Indebtedness that is not, to the extent expressly permitted by this Debenture, expressly made senior in right of payment of the Debentures, the Other Debentures, whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, an event constituting, or that with the passage of time and without being cured would constitute, an Event of Default has occurred and is continuing.

(15) PARTICIPATION. The Holder, as the holder of this Debenture, shall be entitled to such dividends paid and distributions made to the holders of Common Stock to the same extent as if the Holder had converted this Debenture into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common Stock.

(16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, DEBENTURES. The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting, of the holders of Debentures representing not less than a majority of the aggregate principal amount of the then outstanding Debentures, shall be required for any change or amendment to this Debenture or the Other Debentures. Any election by the holders of Debentures representing at least a majority of the aggregate principal amount of the Debentures then outstanding shall bind the holders of all Debentures then outstanding.

(17) TRANSFER. This Debenture may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 2(f) of the Securities Purchase Agreement.

(a) Transfer. If this Debenture is to be transferred, the Holder shall surrender this Debenture to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Debenture (in accordance with Section 18(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Debenture (in accordance with Section 18(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) and this Section 18(a), following conversion or redemption of any portion of this Debenture, the outstanding Principal represented by this Debenture may be less than the Principal stated on the face of this Debenture.

(b) Lost, Stolen or Mutilated Debenture. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Debenture, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Debenture, the Company shall execute and deliver to the Holder a new Debenture (in accordance with Section 18(d)) representing the outstanding Principal.

(c) Debenture Exchangeable for Different Denominations. This Debenture is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Debenture or Debentures (in accordance with Section 18(d) and in principal amounts of at least $100,000) representing in the aggregate the outstanding Principal of this Debenture, and each such new Debenture will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

(d) Issuance of New Debentures. Whenever the Company is required to issue a new Debenture pursuant to the terms of this Debenture, such new Debenture (i) shall be of like tenor with this Debenture, (ii) shall represent, as indicated on the face of such new Debenture, the Principal remaining outstanding (or in the case of a new Debenture being issued pursuant to Section 18(a) or Section 18(c), the Principal designated by the Holder which, when added to the principal represented by the other new Debentures issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Debenture immediately prior to such issuance of new Debentures), (iii) shall have an issuance date, as indicated on the face of such new Debenture, which is the same as the Issuance Date of this Debenture, (iv) shall

have the same rights and conditions as this Debenture, and (v) shall represent accrued but unpaid Interest and Late Charges on the Principal and Interest of this Debenture, from the Issuance Date.

(19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Debenture shall be cumulative and in addition to all other remedies available under this Debenture or any other Transaction Document, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the parties’ right to pursue actual and consequential damages for any failure by the other party hereto to comply with the terms of this Debenture; provided, however, that in no event shall any party recover more than once for the same losses or damages. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled to seek, in addition to all other available remedies, an injunction restraining any breach without the necessity of showing economic loss and without any bond or other security being required.

(20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Debenture is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Debenture or to enforce the provisions of this Debenture or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Debenture, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.

(21) CONSTRUCTION; HEADINGS. This Debenture shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof. The headings of this Debenture are for convenience of reference and shall not form part of, or affect the interpretation of, this Debenture.

(22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Company or the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

(23) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Redemption Price or the arithmetic calculation of the Conversion Rate or the Redemption

Price, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within one Business Day of receipt of the Conversion Notice or Redemption Notice or other event giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation within one Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one Business Day submit via facsimile (a) the disputed determination of the Weighted Average Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or the Redemption Price to the Company’s independent, outside accountant. The Company, at the Company’s expense, shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

(a) Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.

The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Debenture, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) within three Business Days upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least the same number of days prior to the date on which the Company provides notice to any other Person who has the right to receive notice of such an event (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to vote with respect to any Change of Control, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder. Notwithstanding the foregoing, Section 4(i) of the Securities Purchase Agreement shall apply to all notices given pursuant to this Debenture.

Company to any Person pursuant to this Debenture, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers, shall initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with written notice at least two Business Days prior to the due date of such payment setting out such request and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Debenture is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Debenture is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date. Any amount of Principal or other amounts required to be paid under the Transaction Documents (as defined in the Securities Purchase Agreement) other than Interest which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of 12% per annum from the date such amount was due until the same is paid in full (“Late Charge”).

(25) CANCELLATION. After all Principal, accrued Interest and other amounts at any time owed on this Debenture has been paid in full, this Debenture shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

(26) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Debenture.

(27) GOVERNING LAW. This Debenture shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Debenture shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.

(28) SUBORDINATION. To the extent there is any conflict between the provisions of this Section 28 and the other provisions of this Debenture, the provisions of this Section 28 shall control. By its acceptance of this Debenture, Holder and any subsequent holder hereof agrees to the terms and conditions of this Section 28.

(a) Holder subordinates any security interest or lien that Holder may have in or in the future obtain in any property of the Company as security for the indebtedness evidenced by this Debenture (the “Subordinated Debt”) to any security interest or lien that any

Senior Debt Holder (as hereinafter defined) may have in or in the future obtain in any property of the Company as security for any Senior Debt (as hereinafter defined). Notwithstanding the respective dates of attachment or perfection of any security interest of Holder and the security interest of any Senior Debt Holder, the security interest of each Senior Debt Holder in the property of the Company securing the Senior Debt shall at all times be prior to the security interest of Holder in the property of the Company securing the Subordinated Debt. Nothing in this Section 28 shall be construed as any Senior Debt Holder’s consent for Holder to take a security interest or lien in any property of the Company.

(b) All of the Subordinated Debt is subordinated in right of payment to all of the Senior Debt, whether now existing or hereafter arising, including, without limitation, all interest accruing after the commencement by or against the Company of any bankruptcy, reorganization or similar proceeding. As used herein, the following terms shall have the respective meanings set forth below:

“Debt Incurrence Notice” means a written notice delivered by the Company to the Holder promptly following the incurrence by the Company of any Senior Debt after the date hereof, which notice shall (i) set forth the name of the holder or holders of such Senior Debt, the principal amount of such Senior Debt, the maturity date of such Senior Debt and any collateral securing such Senior Debt, and (ii) shall include a certification by the Company that as of the date of such notice, after giving effect to the incurrence of the Senior Debt described therein, the aggregate principal amount of all indebtedness ranking senior to or pari passu with the Subordinated Debt does not exceed $25,000,000.

“Senior Debt” means (i) all “Obligations” as defined in the SVB Loan Agreement, (ii) the indebtedness set forth in Schedule 28(b) hereto and (iii) any indebtedness incurred after the date hereof which has been identified to the Holder in a Debt Incurrence Notice as constituting Senior Debt, provided that, the aggregate principal amount of the obligations and other indebtedness described in clauses (i), (ii) and (iii), together with the aggregate principal amount of all other indebtedness ranking senior to or pari passu with the Subordinated Debt, shall not exceed $25,000,000. Any indebtedness or other obligation excluded from the definition of Senior Debt pursuant to the proviso to the preceding sentence shall rank pari passu with the Subordinated Debt, provided that nothing herein shall be deemed to (A) waive any rights the Holder may have against the Company or any other party as a result of a breach of Section 14(b) hereof or the failure of a certification in any Debt Incurrence Notice to be true and correct, or (B) limit the effectiveness of any agreement pursuant to which any indebtedness or other obligation excluded from the definition of Senior Debt is made subordinate to the Subordinated Debt.

“Senior Debt Holder” means (i) Silicon Valley Bank and its successor and assigns, (ii) the holders of the indebtedness described in Schedule 28(b) hereto and their respective successors and assigns, and (iii) any person identified to the Holder in a Debt Incurrence Notice as the holder of Senior Debt, together with their respective successors and

assigns, so long as each such person described in clauses (i), (ii) and (iii) continues to be a holder of Senior Debt.

“Senior Event of Default” means an event of default under any Senior Debt, including an “Event of Default” as defined in the SVB Loan Agreement.

“SVB Loan Agreement” means that certain Amended and Restated Loan and Security Agreement dated July , 2003, by and between Silicon Valley Bank and the Company, as amended, modified, restated, substituted, extended and renewed at any time and from time to time.

(c) Holder will not demand or receive from the Company (and the Company will not pay to Holder) all or any part of the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or otherwise, nor will Holder exercise any remedy with respect to any of the Senior Debt Holders’ collateral, nor will Holder commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against the Company with respect to the Subordinated Debt (provided that, subject to the priorities set forth in this Section 28, the Holder may join and participate in, but not initiate, any bankruptcy proceeding with respect to the Company so long as the Holder does not interfere with any action taken by any Senior Debt Holder in such proceeding consistent with the terms set forth in this Section 28) for so long as any portion of the Senior Debt remains outstanding, provided, however, that (i) the Holder may receive, and the Company may pay (A) the outstanding principal under this Debenture on the Maturity Date or on such earlier date on which the Senior Debt has been accelerated (provided such acceleration has not been rescinded) or is required to be redeemed pursuant to this Debenture, and (B) interest hereunder in the stated amounts and on the stated dates of payment hereof (without regard to any amendment to such stated amounts or stated dates effected after the date hereof), and (ii) the Holder may exercise any rights or remedies it may have against the Company during the continuance of an Event of Default hereunder, unless at the time of the making such payment or exercise of rights and remedies, a Senior Debt Holder shall have sent the Holder a written notice (in accordance with the Section 24 hereof) certifying that any Senior Event of Default shall have occurred and is continuing with respect to the Senior Debt owing to such Senior Debt Holder and (x) fewer than 180 days shall have elapsed since the date of such notice (the “Standstill Period”), or (y) such Senior Debt has matured and has not been paid or such Senior Debt Holder shall have accelerated the maturity of such Senior Debt by reason of the occurrence of such Senior Event of Default and, in either such case, such Senior Debt Holder is diligently and in good faith seeking to exercise its remedies against the Company and its collateral. The Holder agrees that any Event of Default arising hereunder solely as the result of a Senior Event of Default under, or the acceleration or mandatory redemption of, any Senior Debt, shall be deemed cured in the event that such Senior Event of Default under such Senior Debt is cured or waived in writing or such acceleration or mandatory redemption of such Senior Debt is rescinded in writing. Any blockage of payments and exercise of remedies pursuant to this paragraph (c) (a “Blockage Event”) shall immediately end on the earliest to

occur of (1) the date that the Senior Event of Default giving rise to such Blockage Event shall have been cured or waived in writing, (2) the Senior Debt owing to such Senior Debt Holder shall have been paid in full and (3) except as set forth in clause (y) above, the applicable Standstill Period shall have expired, it being understood that no exercise of remedies shall be commenced with respect to an Event of Default deemed cured in accordance with the preceding sentence. There shall be at least 90 consecutive days during which no Standstill Period is in effect during any period of 360 consecutive days. If at any time following a Blockage Event, the Holder is no longer prohibited from receiving any payments with respect to the Subordinated Debt, the Holder shall be entitled to receive all payments with respect to the Subordinated Debt that have been blocked, and any late payment charges, together with any default interest to the extent provided for by this Debenture. Nothing in this Section 28 shall prohibit Holder from converting all or any part of the Subordinated Debt into equity securities of the Company or from receiving and retaining any notes or securities distributed by the Company to its creditors in connection with a bankruptcy proceeding.

(d) Holder shall promptly deliver to the Senior Debt Holders in the form received (except for endorsement or assignment by Holder where required by the Senior Debt Holders) for application to the Senior Debt any payment, distribution, security or proceeds received by Holder with respect to the Subordinated Debt other than in accordance with this Section 28, provided that the Holder shall be entitled to deposit any such payment with any court in the event that the Holder shall not have received written instructions from all Senior Debt Holders as to the disposition of any such amount.

(e) In the event of the Company’s insolvency, reorganization or any case or proceeding under any bankruptcy or insolvency law or laws relating to the relief of debtors, the provisions of this Section 28 shall remain in full force and effect, and the Senior Debt Holders’ claim against the Company and the estate of the Company shall be paid in full to the extent provided herein before any payment is made to Holder.

(f) For so long as any of the Senior Debt remains unpaid, Holder authorizes any Senior Debt Holder in any bankruptcy, insolvency or similar proceeding involving the Company to file the appropriate claim or claims in respect of the Subordinated Debt on behalf of Holder if Holder does not do so prior to 30 days before the expiration of the time to file claims in such proceeding.

(g) This Section 28 shall remain effective for so long as the Company owes any portion of the Senior Debt to any Senior Debt Holder. If, at any time after payment in full of the Senior Debt any payments of the Senior Debt must be disgorged by a Senior Debt Holder for any reason (including, without limitation, the bankruptcy of the Company) this Section 28 and the relative rights and priorities set forth herein shall be reinstated as to all such disgorged payments as though such payments had not been made and Holder shall immediately pay over to such Senior Debt Holder (subject to the proviso to paragraph (d) above) all payments received with

respect to the Subordinated Debt to the extent that such payments would have been prohibited hereunder. At any time and from time to time, without notice to Holder, any Senior Debt Holder may take such actions with respect to the Senior Debt owing to it as such Senior Debt Holder, in its sole discretion, may deem appropriate (subject to any consent rights of the Company), including, without limitation, terminating advances to the Company, increasing the principal amount (but without any corresponding change in the definition of “Senior Debt” as set forth herein), extending the time of payment, increasing applicable interest rates, renewing, compromising or otherwise amending the terms of any documents affecting such Senior Debt and any collateral securing such Senior Debt, and enforcing or failing to enforce any rights against the Company or any other person. No such action or inaction shall impair or otherwise affect such Senior Debt Holder’s rights hereunder.

(h) The provisions of this Section 28 shall be binding on, and inure to the benefit of, the Holder, the Senior Debt Holders and their respective successors and assigns, and, if the Company refinances a portion of the Senior Debt with any person, such person shall be deemed a successor of such Senior Debt Holder for purposes of this Section 28.

(i) The provisions of this Section 28 may be amended only by written instrument signed by Holder, each Senior Debt Holder and the Company.

(29) CERTAIN DEFINITIONS. For purposes of this Debenture, the following terms shall have the following meanings:

(a) “Approved Stock Plan” means any employee benefit plan which has been approved by the Board of Directors of the Company, pursuant to which the Company’s securities may be issued to any employee, officer, director or other service provider to the Company for services provided to the Company.

(c) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

(d) “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for Common Stock.

(e) “Excluded Securities” shall have the meaning given to it in the Securities Purchase Agreement.

Date, that price which shall be computed as 90% of the arithmetic average of the Weighted Average Price of the Common Stock on each of the five consecutive Trading Days immediately preceding such Interest Date. All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction during such period.

(g) “Maturity Date Conversion Price” means that price which shall be computed as 90% of the arithmetic average of the Weighted Average Price of the Common Stock on each of the five consecutive Trading Days immediately preceding the Maturity Date. All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction during such period.

(h) “Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

(i) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

(k) “Qualified Public Offering” means a firm commitment underwritten offering of Common Stock by the Company after the Issuance Date pursuant to an effective registration statement under the Securities Act of 1933, as amended, that yields net proceeds to the Company of not less than $50,000,000.

(l) “Redemption Premium” means 120% in the case of the Events of Default described in Section 4(a).

(m) “Registration Rights Agreement” means that certain registration rights agreement between the Company and the initial holders of the Debentures relating to the registration of the resale of the shares of Common Stock issuable upon conversion of the Debentures.

(o) “Securities Purchase Agreement” means that certain securities purchase agreement between the Company and the initial holders of the Debentures pursuant to which the Company issued the Debentures.

(p) “Semi-Annual Period” means each of: the period beginning on and including January 1 and ending on and including June 30; and the period beginning on and

(q) “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York Time).

(r) “Warrants” has the meaning ascribed to such term in the Securities Purchase Agreement, and shall include all warrants issued in exchange therefor or replacement thereof.

(s) “Weighted Average Price” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading) as reported by Bloomberg through its “Volume at Price” functions, or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York Time (or such other time as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as such market publicly announces is the official close of trading) as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 23. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed as of the Issuance Date set out above.

Reference is made to the Convertible Debenture (the “Debenture”) issued to the undersigned by TeleCommunication Systems, Inc. (the “Company”). In accordance with and pursuant to the Debenture, the undersigned hereby elects to convert the Conversion Amount (as defined in the Debenture) of the Debenture indicated below into shares of Class A Common Stock, par value $0.01 per share (the “Common Stock”), of the Company as of the date specified below.

After giving effect to the conversion of the Aggregate Conversion Amount of Debentures requested to be converted pursuant hereto, the undersigned will not be the beneficial owner of 10% or more of the outstanding Common Stock (determined as set forth in Section 3(d)(i) of the Debenture).

Please issue the Common Stock into which the Debenture is being converted in the following name and to the following address:

The Company hereby acknowledges this Conversion Notice and hereby directs American Stock Transfer & Trust Company to issue the above indicated number of shares of Class A Common Stock in accordance with the Transfer Agent Instructions dated, 2004 from the Company and acknowledged and agreed to by American Stock Transfer & Trust Company.

NEITHER THE ISSUANCE AND SALE OF THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY ONLY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (C) RULE 144(K) UNDER SAID ACT AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

TeleCommunication Systems, Inc., a Maryland corporation (the “Company”), hereby certifies that, for Ten United States Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, OYSTER POND PARTNERS, L.P., the registered holder hereof or its permitted assigns, is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon surrender of this Warrant to Purchase Common Stock (including all Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the date hereof, but not after 5:30 P.M., New York Time, on the Expiration Date (as defined below), Twelve Thousand Two Hundred And Thirty-One (12,231) fully paid nonassessable shares of Common Stock (as defined below) (the “Warrant Shares”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 15. This Warrant is one of the Warrants to Purchase Common Stock (the “SPA Warrants”) issued pursuant to Section 1 of that certain Securities Purchase Agreement, dated as of December 18, 2003 (the “Initial Issuance Date"), among the Company and the purchasers (the “Purchasers”) referred to therein (the “Securities Purchase Agreement”).

(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the holder hereof on any day from and after the date hereof, in whole or in part, by (i) delivery by the holder to the Company of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of such holder’s election to exercise this Warrant and (ii) (A)

payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in certified funds or by wire transfer of immediately available funds or (B) if applicable, by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)) and (iii) the surrender to a common carrier for overnight delivery to the Company, on or as soon as practicable following the date the holder of this Warrant delivers the Exercise Notice to the Company, delivery of this Warrant to the Company (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction). Following the date on which the Company has received each of the Exercise Notice, the Aggregate Exercise Price (or notice of a Cashless Exercise) and this Warrant (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction) (the “Exercise Delivery Documents”), the Company shall (X) provided that the Company’s transfer agent (the “Transfer Agent”) is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, on or before the third Business Day thereafter credit such aggregate number of shares of Common Stock to which the holder of this Warrant is entitled pursuant to such exercise to the holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, on or before the fifth Business Day thereafter issue and deliver to the address specified in the Exercise Notice, a certificate, registered in the name of the holder of this Warrant or its designee, for the number of shares of Common Stock to which the holder of this Warrant is entitled pursuant to such exercise. Upon delivery of the Exercise Notice, this Warrant and the Aggregate Exercise Price referred to in clause (ii)(A) above or notification to the Company of a Cashless Exercise referred to in Section 1(d), the holder of this Warrant shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised as of the date of the Exercise Notice, irrespective of the date of delivery of the certificates evidencing such Warrant Shares. If the number of Warrant Shares represented by this Warrant submitted for exercise pursuant to this Section 1(a) is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than five (5) Business Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all taxes, including without limitation, all documentary stamp, transfer or similar taxes, or other incidental expense that may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.

(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $6.50, subject to adjustment as provided herein.

Common Stock to which the holder is entitled upon the holder’s exercise of this Warrant, the Company shall pay as additional damages in cash to such holder on each day thereafter until the Company has cured such failure, an amount equal to 1.0% of the product of (A) the sum of the number of shares of Common Stock not issued to the holder on a timely basis and to which the holder is entitled and (B) the difference, but only if a positive number, between the Weighted Average Price of the Common Stock on the trading day immediately preceding the last possible date which the Company could have issued such Common Stock to the holder without violating Section 1(a) and the Exercise Price. Notwithstanding the foregoing, the Company shall not be obligated to make such payment of the Common Stock in the event the dispute resolution provisions of Section 12 are being utilized. In addition, the holder, upon written notice to the Company, may void its Exercise Notice with respect to, and have returned, any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the voiding of an Exercise Notice shall negate the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise.

(d) Cashless Exercise. The holder of this Warrant may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):


Net Number =		(A x B) - (A x C)
		B

(e) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the holder the number of Warrant Shares that are not disputed and such dispute shall be resolved in accordance with Section 12.


	(i) Beneficial Ownership. The Company shall not effect the exercise of this Warrant, and no Person (as defined below) who is a holder of this Warrant shall have the right to exercise this Warrant, to the extent that after giving effect

to such exercise, such Person (together with such Person’s affiliates) would beneficially own in excess of 9.99% of the shares of the Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, such Person (together with such Person’s affiliates) shall be deemed to beneficially own of the shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination in such sentence is being made, but shall not be deemed to beneficially own shares of Common Stock which would be issuable upon (i) exercise of the remaining, unexercised portion of this Warrant and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Person and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Warrant, in determining the number of outstanding shares of Common Stock a holder may rely on the number of outstanding shares of Common Stock, on any determination date, as reflected in (1) the Company’s Form 10-Q, Form 10-K most recently filed, (2) a more recent public announcement by the Company or (3) any other notice by the Company setting forth the number of shares of Common Stock outstanding provided pursuant to the next sentence. For any reason at any time, upon the written request of the holder of this Warrant, the Company shall within two (2) Business Days confirm in writing to the holder of this Warrant the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the SPA Securities and the SPA Warrants, by the holder of this Warrant and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.

(ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock upon exercise of this Warrant if the issuance of such shares of Common Stock (individually or together with all other shares of Common Stock issued or issuable now or in the future, pursuant to (i) this Warrant, (ii) the Debentures issued by the Company pursuant to the Securities Purchase Agreement, (iii) the other Warrants issued pursuant to the Securities Purchase Agreement, or (iv) the Securities Purchase Agreement) would exceed that number of shares of Common Stock which the Company may issue (including, as applicable, any shares of Common Stock issued upon conversion of or as payment of any interest under the SPA Securities) without triggering the stockholder approval requirements set forth in Rule 4350(i) under the rules of the Principal Market (the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market and in accordance with applicable law for issuances of Common Stock in excess of the threshold amount

in such rule or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the SPA Warrants representing at least a majority of the shares of Common Stock underlying the SPA Warrants then outstanding. Until such approval is obtained, no Purchaser shall be issued, upon exercise of any SPA Warrants, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the sum of the number of Common Shares and the number of Conversion Shares and Warrant Shares underlying the SPA Securities and the SPA Warrants issued to such Purchaser pursuant to the Securities Purchase Agreement on the Issuance Date and the denominator of which is the sum of the number of Common Shares and the number of Conversion Shares and Warrant Shares underlying the SPA Securities and the SPA Warrants issued to all the Purchasers pursuant to the Securities Purchase Agreement on the Issuance Date (with respect to each Purchaser, the “Exchange Cap Allocation”). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s SPA Warrants, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of SPA Warrants shall exercise all of such holder’s SPA Warrants into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of SPA Warrants on a pro rata basis in proportion to the shares of Common Stock underlying the SPA Warrants then held by each such holder.

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

(a) Adjustment upon Issuance of Common Stock. If and whenever on or after the date of issuance of this Warrant the Company issues or sells, or in accordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock issued or deemed to have been issued by the Company in connection with any Excluded Security) for a consideration per share (the “New Securities Issuance Price”) less than a price (the “Applicable Price”) equal to the Exercise Price in effect immediately prior to such issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to an amount equal to the greater of (x) the New Securities Issuance Price and (y) $2.50 (subject to adjustment for any stock split, stock dividend, stock combination or other similar transaction after the Issuance Date), and the number of Warrant Shares shall be adjusted to the number of shares of Common Stock determined by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares acquirable upon exercise

of this Warrant immediately prior to such adjustment and dividing the product thereof by the New Securities Issuance Price. For purposes of determining the adjusted Exercise Price under this Section 2(a), the following shall be applicable:

(i) Issuance of Options. If the Company in any manner grants any Options, other than Excluded Securities, and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option is less than the Applicable Price, then, solely for purposes of this Section 2, such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 2(a)(i), the “lowest price per share for which one share of Common Stock is issuable upon exercise of such Options or upon conversion, exercise or exchange of such Convertible Securities” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Exercise Price or number of Warrant Shares shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities.

(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities, other than Excluded Securities, and the lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the Applicable Price, then, solely for purposes of this Section 2, such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(a)(ii), the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security. No further adjustment of the Exercise Price or number of Warrant Shares shall be made upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other provisions of this Section 2(a), no further adjustment of the Exercise Price or number of Warrant Shares shall be made by reason of such issue or sale.

(iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock increases or decreases at any time, the Exercise Price and the number of Warrant Shares in effect at the time of such increase or decrease shall be adjusted to the Exercise Price and the number of Warrant Shares which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 2(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the date of issuance of this Warrant are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 2(a) shall be made if such adjustment would result in an increase of the Exercise Price to an Exercise Price greater than the Exercise Price in effect on the Issuance Date (as adjusted for any stock splits, reverse stock splits, stock dividends, stock combinations and similar transactions after the Issuance Date) then in effect or a decrease in the number of Warrant Shares to a number less than the number of Warrant Shares (as adjusted for any stock splits, reverse stock splits, stock dividends, stock combinations and similar transactions after the Issuance Date) then issuable hereunder.

(iv) Calculation of Consideration Received. If case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $0.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Weighted Average Price of such security on the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Board of Directors of the Company and the holders of SPA Warrants representing at least a majority of the shares of Common Stock


	obtainable upon exercise of the SPA Warrants then outstanding unless the Board of Directors of the Company shall have obtained a fairness opinion from an independent financial advisor in which case the fair value shall be as stated in such fairness opinion. If, in the absence of a fairness opinion, such parties are unable to reach agreement within 10 days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined in accordance with Section 12 hereof.

	(v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(b) Adjustment upon Subdivision or Combination of Common Stock. If the Company at any time after the date of issuance of this Warrant subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time after the date of issuance of this Warrant combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(b) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(c) Other Events. If any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of Directors, in their reasonable discretion, will make an appropriate adjustment in the Exercise Price and the number of Warrant Shares so as to protect the rights of the holder of this Warrant; provided that no such adjustment pursuant to this Section 2(c) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.

3. RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:

(a) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction of which (i) the numerator shall be the Weighted Average Price of the Common Stock on the trading day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (ii) the denominator shall be the Weighted Average Price of the Common Stock on the trading day immediately preceding such record date; and

(b) the number of Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding paragraph (a); provided that in the event that the Distribution is of common stock (“Other Common Stock”) of a company whose common stock is traded on a national securities exchange or a national automated quotation system, then the holder of this Warrant may elect to receive a warrant to purchase Other Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Common Stock that would have been payable to the holder of this Warrant pursuant to the Distribution had the holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding paragraph (a) and the number of Warrant Shares calculated in accordance with the first part of this paragraph (b).

(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the holder of this Warrant will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

following which the Company is not a surviving entity, the Company will secure from the Person purchasing such assets or the Person issuing the securities or providing the assets in such Organic Change (in each case, the “Acquiring Entity”) a written agreement (in form and substance reasonably satisfactory to the holders of SPA Warrants representing at least a majority of the shares of Common Stock obtainable upon exercise of the SPA Warrants then outstanding) to deliver to the holder of this Warrant in exchange for this Warrant, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to this Warrant and reasonably satisfactory to the holder of this Warrant (including, an adjusted exercise price equal to the value for the Common Stock reflected by the terms of such consolidation, merger or sale, and exercisable for a corresponding number of shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant), if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger or sale). In the event that an Acquiring Entity is directly or indirectly controlled by a company or entity whose common stock or similar equity interest is listed, designated or quoted on a securities exchange or trading market, the holder of this Warrant may elect to treat such Person as the Acquiring Entity for purposes of this Section 4(b). Prior to the consummation of any other Organic Change, the Company shall be required to make appropriate provision (in form and substance reasonably satisfactory to the holders of SPA Warrants representing at least a majority of the shares of Common Stock obtainable upon exercise of the SPA Warrants then outstanding) to insure that the holder of this Warrant thereafter will have the right to acquire and receive in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the exercise of this Warrant (without regard to any limitations on the exercise of this Warrant including those set forth in Sections 1(f)(i) and 1(f)(ii) of this Warrant), such shares of stock, securities or assets that would have been issued or payable in such Organic Change with respect to or in exchange for the number of shares of Common Stock which would have been acquirable and receivable upon the exercise of this Warrant as of the date of such Organic Change (without regard to any limitations on the exercise of this Warrant including those set forth in Sections 1(f)(i) and 1(f)(ii) of this Warrant).

5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the holder of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) will, so long as any of the SPA Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the exercise of the SPA Warrants, 150% of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the SPA Warrants then outstanding (without regard to any limitations on exercise).

6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. No holder, solely in such Person’s capacity as a holder, of this Warrant shall be entitled to vote or receive dividends or be deemed the holder of shares of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the holder hereof, solely in such Person’s capacity as a holder of this Warrant, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the holder of this Warrant of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on such holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 6, the Company will provide the holder of this Warrant with copies of the same notices and other information given to the Company’s public stockholders of the Company generally, contemporaneously with the giving thereof to the Company’s public stockholders.

(a) Transfer of Warrant. Subject to Section 2(g) of the Securities Purchase Agreement, if this Warrant is to be transferred, the holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the holder of this Warrant a new Warrant (in accordance with Section 7(d)), registered as the holder of this Warrant may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less then the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the holder of this Warrant representing the right to purchase the number of Warrant Shares not being transferred.

(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the holder of this Warrant to the Company in customary form, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

(c) Warrant Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the holder of this Warrant at the time of such surrender; provided, however, that no Warrants for fractional shares of Common Stock shall be given.

(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the holder of this Warrant which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

8. NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the holder of this Warrant with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the holder of this Warrant (i) reasonably promptly upon any adjustment of the Exercise Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least the same number of days prior to the date on which the Company provides notice to any other Person who has the right to receive notice of such an event (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issues or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of Common Stock (other than, in each case, Excluded Securities) or (C) for determining rights to vote with respect to any Change of Control (as defined in the SPA Securities), dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder. Notwithstanding the foregoing, Section 4(j) of the Securities Purchase Agreement shall apply to all notices given pursuant to this Warrant.

9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the holders of SPA Warrants representing at least a majority of the shares of Common Stock obtainable upon exercise of the SPA Warrants then outstanding; provided that no such action may increase the exercise price of this Warrant or decrease the number of shares or class of stock obtainable upon exercise of this Warrant without the written consent of the holder of this Warrant. No such amendment shall be effective to the extent that it applies to less than all of the holders of the SPA Warrants then outstanding.

10. GOVERNING LAW. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, (i) with respect to matters relating to the issuance of securities pursuant to this Warrant, the internal laws of the State of Maryland and (ii) with respect to all other matters, the internal laws of the State of New York, in each case without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York, the State of Maryland or any other jurisdictions) that would cause the application of

the laws of any jurisdictions other than the State of New York or the State of Maryland, as the case may be.

11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

12. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within three Business Days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the holder of this Warrant. If the holder of this Warrant and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the holder of this Warrant, which approval shall not be unreasonably withheld or delayed, or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, the Securities Purchase Agreement, the SPA Securities and the Registration Rights Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the holder of this Warrant right to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the holder of this Warrant and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

14. TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company, except as may otherwise be required by Section 2(f) of the Securities Purchase Agreement.

15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:

(b) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

(c) “Common Stock” means (i) the Company’s Class A common stock, par value $0.01 per share, and (ii) any capital stock into which such Common Stock shall have been changed or any capital stock resulting from a reclassification of such Common Stock.

(d) “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for Common Stock.

(e) “Excluded Securities” shall have the meaning given to it in the Securities Purchase Agreement.

(g) “Options” means any rights, warrants or options to subscribe for or purchase Convertible Securities or Common Stock.

(h) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

(i) “Principal Market” means the Nasdaq National Market or in the event that the Company is no longer listed with the Nasdaq National Market, the market or exchange on which the Common Stock is then listed and traded, which only may be either The New York Stock Exchange, Inc. or the American Stock Exchange.

(j) “Registration Rights Agreement” means that certain registration rights agreement between the Company and the Purchasers.

(k) “SPA Securities” means the subordinated convertible debentures issued pursuant to the Securities Purchase Agreement.

announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as such market publicly announces is the official close of trading) as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the holder of this Warrant are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 12. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK

The undersigned holder hereby exercises the right to purchase _____________ of the shares of Common Stock (“Warrant Shares”) of TeleCommunication Systems, Inc., a Maryland corporation (the “Company”), evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

After giving effect to the exercise of the Warrant Shares requested to be converted pursuant hereto, the undersigned will not be the beneficial owner of 10% or more of the outstanding Common Stock (determined as set forth in Section 1(f)(i) of the Warrant).

1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as:

__________ a “Cash Exercise” with respect to __________ Warrant Shares; and/or

[Insert this paragraph (2) in the event that the holder has not elected a Cashless Exercise in accordance with the terms of the Warrant as to all of the Warrant Shares to be issued pursuant hereto] 2. Payment of Exercise Price. The holder is hereby delivering to the Company payment in the amount of $ __________ representing the Aggregate Exercise Price for such Warrant Shares not subject to a Cashless Exercise in accordance with the terms of the Warrant.

3. Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant.

The Company hereby acknowledges this Exercise Notice and hereby directs American Stock Transfer & Trust Co. to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated ___________ ___, 2004 from the Company and acknowledged and agreed to by American Stock Transfer & Trust Co.

TeleCommunication Systems, Inc., a Maryland corporation (the “Company”), hereby certifies that, for Ten United States Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, 033 GROWTH INTERNATIONAL FUND LTD., the registered holder hereof or its permitted assigns, is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon surrender of this Warrant to Purchase Common Stock (including all Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the date hereof, but not after 5:30 P.M., New York Time, on the Expiration Date (as defined below), Forty-Thousand Three Hundred And Sixteen (40,316) fully paid nonassessable shares of Common Stock (as defined below) (the “Warrant Shares”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 15. This Warrant is one of the Warrants to Purchase Common Stock (the “SPA Warrants”) issued pursuant to Section 1 of that certain Securities Purchase Agreement, dated as of December 18, 2003 (the “Initial Issuance Date”), among the Company and the purchasers (the “Purchasers”) referred to therein (the “Securities Purchase Agreement”).

(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $6.50, subject to adjustment as provided herein.


	Net Number =	(A x B) - (A x C)
		B


	(i) Beneficial Ownership. The Company shall not effect the exercise of this Warrant, and no Person (as defined below) who is a holder of this Warrant shall have the right to exercise this Warrant, to the extent that after giving effect

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

obtainable upon exercise of the SPA Warrants then outstanding unless the Board of Directors of the Company shall have obtained a fairness opinion from an independent financial advisor in which case the fair value shall be as stated in such fairness opinion. If, in the absence of a fairness opinion, such parties are unable to reach agreement within 10 days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined in accordance with Section 12 hereof.

(v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.